


VII-VIII 



THE ECONOMIC HISTORY 



OF THE 



BALTIMORE AND OHIO RAILROAD 

1827-1853 



JOHNS HOPKINS UNIVERSITY STUDIES 



IN 



Historical and Political Science 

HERBERT B. ADAMS, Editor 



History is past Politics and Politics are present History.— Freeman 



FIFTEENTH SERIES 
VII-VIII 

THE ECONOMIC HISTORY 

OP THE 

BALTIMORE AND OHIO RAILROAD 

18^7-1853 



By MILTON REIZENSTEIN, Ph. D. 

Sometime Scholar in Economics^ Johns Hopkins University 



baltimore 
The Johns Hopkins Pres! 

PUBLISHED MONTHLY 

Jnly-August, 1897 



A/ ( -^^ 



fe^-^^^ 






CJOPTRKJHT, 1897, BY THE JOHNS HOPKINS PRESS. 



THE FRIBDENWALD CO. PRINTERS, 
BALTIMORE. 



CONTENTS. 

PAGE 

Introduction 7 

I. Organization of the Baltimore and Ohio Railway 
Company : 

Baltimore and the West ; need of an efficient connection, 9 

Insufficiency of turnpikes and canals 10 

Organization of the B. & 0. Railway Company 12 

Analysis of the Company's charter 15 

II. Beginning of Construction. Baltimore to Harper's 
Ferry (1828-1834) : 

The corner-stone laid 20 

Public good- will toward the Company 21 

Congress refuses aid 22 

First division opened 24 

Experiments with locomotive power 25 

Opened to Frederick ; results 26 

American locomotives 28 

Contest between the Railroad and the C. <fe 0. Canal 29 

Improvements in technique 33 

III. Extension. Harper's Ferry to Cumberland (1834-1842) : 

New and projected railroads 37 

Subscriptions by Maryland and Baltimore 38 

" Preferred stock " 40 

Rates, revenues and finances 41 

Virginia's legislation 44 

Stock orders, bond sales and dividends 47 

Completion to Cumberland 50 

IV. Embarrassment and Delay (1842-1848) : 

Delays in legislation 51 

Financial difficulties ^ 54 

Need of reconstruction and new equipment 58 

V. Completion. Cumberland to Wheeling (1848-1853) : 

President Swann and his policy 62 

Financial measures 64 

A question as to route 66 

Perfecting of road-bed and equipment 69 

The railroad completed 70 



6 Contents, [280 

VI. General Kesults : 

E£Fects upon the industries of Maryland 73 

Mines and quarries 73 

Flour, tobacco, &c 74: 

Cattle and animal products 75 

Development of towns 76 

Finances of the railroad 78 

Bonds 78 

Dividends 79 

Stock orders 79 

Financial policy 80 

Discrimination in rates 82 

Contributions to technique of railroading 83 

VII. Appendix : 

1. Chronology of the B. & O. Railroad 85 

2. Cost of construction 86 

3. Financial statement (1830-1852) 87 

4. Commodities transported eastwardly (1831-1852) 88 

5. Bibliography 89 



INTRODUCTION. 

It has been the intention of the writer to present a brief 
histor}^ of the Baltimore and Ohio Railroad from its incep- 
tion in 1826 until its completion to WheeUng in January, 

1853. 

The monograph has been designed as a study in the 
economics of transportation, and stress has been laid upon 
the influence of the railroad in the development of the 
industry and commerce of the city of Baltimore, and of the 
agricultural, mineral and manufacturing resources of the 
state of Maryland. The Baltimore and Ohio having been 
the first great through-route railroad projected in America, 
has naturally an important place in the regard of the student 
of transportation. The beginnings of some of' the present 
difficult railroad problems appear in the history of this road, 
and these have not only been treated incidentally as they 
appeared in connection with the legislative, financial and 
mechanical history of the railroad, but have been summar- 
ized in the final chapter. 

The hearty thanks of the writer are due Prof. Sidney 
Sherwood and Dr. J. H. Hollander of the Johns Hopkins 
University for their valuable aid in the preparation of this 
monograph. 



THE ECONOMIC HISTORY OF . 
THE BALTIMORE AND OHIO RAILROAD, 

1827-1853. 



CHAPTER I. 



Organization of the Baltimore and Ohio 
Railway Company. 

Towards the end of the first quarter of the present cen- 
tury, Baltimore was confronted by the important economic 
problem, how to retain its rank as a prominent commercial 
emporium of the United States. 

Other cities were drawing away from Baltimore its valu- 
able trade with the West by introducing improved systems 
of transportation. 

The city of New York had led the way in this particular 
line of enterprise by the construction of the Erie Canal — 
completed in 1825 — extending from Albany to Buffalo. 
Pennsylvania had also begun to open up its resources by a 
judicious system of internal improvements, mainly canals, 
built especially for the transportation of coal. 

Virginia had not been insensible to the fact that by the 
construction of proper canals through the valleys of the 
Potomac or the James rivers, a valuable commercial inter- 
course might be secured with the West. Ohio, too, had 
begun a system of internal improvements, designed to 
afford a channel for the outflow of its rich products as well 
as to provide a suitable means of ingress for foreign com- 
modities. 

It must not be supposed that Maryland had not been 



10 The Econmiic History of the [284 

alive to the importance of internal improvements or that it 
had taken no active steps in that direction. As early as 
1784 the states of Maryland and Virginia had conjointly 
granted a charter to the Potomac Company, giving it power 
to improve the navigation of the Potomac river from tide- 
water to the highest practicable point on the North Branch, 
and to continue it thence to Cumberland by means of canals. 

But this company became involved in difficulties, and a 
commission was appointed by the states of Maryland and 
Virginia in 1821 to investigate its affairs. The commission 
reported that the company was hopelessly insolvent, that it 
was unreasonable to expect that the company would ever 
be able to carry out the objects for which it was incorpo- 
rated, and that it was best to divest the Potomac Company 
of its charter and adopt some more effective mode of im- 
proving the navigation of the river. This, the report con- 
tinued, could be best accomplished by the construction of 
a regular canal outside of the river-bed, though following 
its ravine, and that this would be not only the most useful 
and durable, but incomparably the cheapest improvement. 
Baltimore, it was recommended, should be connected with 
the projected canal by a lateral branch. This report, sub- 
mitted to the legislatures of Maryland and Virginia, ulti- 
mately led to the construction of the Chesapeake and Ohio 
Canal. 

Congress had long before turned its attention to the im- 
portant question of internal improvement. As early as 
1806 the United States had begun the construction of the 
Cumberland or National Road. This road occupied the 
site a part of that route along which, years before, emigra- 
tion and traffic over the mountains had flowed from Balti- 
more. 

Recognizing the importance of the canal projected along 
the valley of the Potomac to the West, Congress in April, 
1824, appropriated $30,000 for the expenses of making a 
survey, estimates of the probable cost, and plans for the 
construction of such a canal. The results, as reported by 



285] Baltimore and Ohio Railroad, 1827-1853. 11 

the committee of engineers appointed for the purpose, are 
exhibited in the following summarized table : 

«;fiPHons Distances. f^toPnV Number Amount of 

Sections, j^j^^g^ y^g^ Feet.* of Locks. Estimate. 

Eastern i86 578 74 $8,177,081.05 

Middle 70 loio 1961 246 10,028,122.86 

Western 85 440 619 78 4,170,223.78 



Totals .... 241 1450 3158 398 $22,375,427-69 

The report of the commissioners appointed to inquire into 
the condition of the Potomac Company gave rise to the 
Chesapeake and Ohio Canal. The report of the engineers 
appointed by Congress, in the light of subsequent events, 
may be regarded as one of the direct causes leading to the 
construction of the Baltimore and Ohio Railroad. It was 
believed that the burden of payment would fall on the 
state of Maryland and the city of Baltimore rather than 
upon the national- government In consequence, when the 
enormous cost of the project became known, the enthusiasm 
in Baltimore for the construction of such a canal was con- 
siderably abated, and the hope of connecting Baltimore with 
the West by a still-water route seemed a forlorn one. Be- 
sides, there was the other very material difficulty that the 
scarcity of water in the AUeghanies at the high elevation 
over which the canal must pass would make its successful 
accomplishment problematic, even if the money needed 
could be raised. Baltimoreans, too, did not relish the idea 
of making Georgetown the eastern terminus of the canal, 
with Baltimore connected therewith by a lateral branch some 
fifty miles in length. 

However, quick action was necessary on the part of 
Baltimore, for Philadelphia and New York had greatly en- 
croached upon its trade. Turnpike roads were already be- 
hind the times. Canals, as had been shown, owing to the 
natural obstacles of a mountainous country, were entirely 
too expensive and would, besides, take too long a time to 
construct. Some new method of transportation must be 
found. 



12 The Economic History of the [286 

It is to Philip E. Thomas of Baltimore, more, perhaps, 
than to any other one man, that the credit of introducing 
railroads for passenger and freight traffic into the United 
States is due. Mr. Thomas was a Quaker merchant of Bal- 
timore, and was also in 1826, president of the Mechanics' 
Bank of that city. He had been one of the commissioners 
on the part of the state of Maryland in the recently organ- 
ized Chesapeake and Ohio Canal Company, but he had 
resigned that position after the futility of the scheme was 
shown. 

With Mr. George Brown, a director in the bank of which 
he was president, Mr. Thomas began to study the new mode 
of transportation then being tried with success in England 
upon the Liverpool and Manchester Railway.^ Evan 
Thomas, a brother of P. E. Thomas, and William Brown, 
a brother of George Brown, were both in England at the 
time and forwarded to their respective brothers in Baltimore, 
information relative to the new project. The conjoint study 
of the question by the two Baltimoreans convinced them that 
the railway was the method of communication with the West 
that Baltimore required. Having interested other promi- 
nent Baltimoreans in the plan, they determined to organize 
a railroad company for general traffic. This was the first 
company of the kind in America. 

On February 12, 1827, a meeting of some twenty-five 
prominent citizens was held at the residence of Philip E. 
Thomas, to consider the best means of restoring to Balti- 
more that trade with the West that had been diverted. 
Various documents were read tending to show the great 
advantages which railways possessed over turnpikes and 
canals as a mode of transportation, and a committee was 
appointed to examine carefully into these advantages and 
into the general subject of railroads and report at the next 
meeting. 

On the appointed evening, February 19, 1827, this com- 

^ This railroad was not formally opened, however, until September 
15, 1830. 



287] Baltimore and Ohio Railroad, 1827-1853. 13 

mittee, through its chairman, Philip E. Thomas, presented 
a full account of its labors. The efforts of New York and 
Philadelphia to divert the western trade from Baltimore 
were noted, as well as the plan then being proposed to con- 
nect the tide-water of the Susquehanna, by means of a canal, 
with the eastern extremity of the Pennsylvania state canal, in 
order to secure the ascending and descending trade of the 
Susquehanna, with the ultimate object of securing direct 
water communication with the Great Lakes. But no matter 
how important absolutely such trade might be to Baltimore, 
it was of minor consideration when compared with the im- 
mense commerce of the West. Baltimore was situated one 
hundred miles nearer the western navigable waters than was 
Philadelphia, the report said, and two hundred miles nearer 
than New York. New Orleans was pointed out as the only 
city which could compete with Baltimore for the western 
trade. 

After showing at length the advantages which the canal 
system had in England over the same system in America, 
and arguing that if England with these advantages was 
abandoning the canal for the railroad, America might surely 
do so, the report pointed out that although only one^ rail- 
way had as yet been constructed in America, the results had 
been very satisfactory. So far as the competition of New 
Orleans with Baltimore was concerned, it was stated that the 
western products could be delivered in Baltimore by rail at 
smaller expense and with less loss than at New Orleans by 
boat. 

The value of a system of railways in the transportation 
of perishable food supplies was recognized in the remark 

^ In point of fact there were two short roads in operation in the 
United States at this time. The first railroad built in the United 
States, the one here referred to, was three miles long and extended 
from the granite quarries at Quincy, Mass., to the Neponset river. 
The second was a gravity railroad, nine miles long, extending from 
the coal mines at Mauch Chunk, Pa., to the Lehigh river. For 
full descriptions of these railroads see William H. Brown, "The 
History of the First Locomotives in America," ch. xii, pp. 70-71. 



14 The Economic History of the [288 

that if the proposed railroad were built from Baltimore to 
the Ohio river, an extensive market in the West would at 
once be opened for the fish and oysters of eastern Maryland, 
necessarily increasing the value of the numerous fisheries 
and oyster-beds of the Chesapeake Bay. This would cause 
a large increase of traffic upon the waters of the bay, and 
would open to the residents of eastern Maryland a new and 
highly lucrative source of wealth. 

This report is to-day probably one of the best records 
extant of ideas in 1827 regarding railroads and their econo- 
mic importance. This report of the committee was adopted, 
and it was resolved to apply immediately to the legislature 
of Maryland for an act incorporating the Baltimore and 
Ohio Railway Company, with all powers needed to con- 
struct a railway from the city of Baltimore to the Ohio 
river. A committee of twenty-five persons was appointed 
to apply to the legislature of Maryland for the desired act 
of incorporation, and another committee was appointed to 
examine the two railways then in operation at Mauch 
Chunk, Pa., and Quincy, Mass. 

The report of the last-mentioned committee is dated 
June 12, 1827, and describes at considerable length the 
mode of construction of the two roads examined.^ From 
their investigations the committee drew the conclusions that 
there would probably be no difficulty in constructing the 
proposed railway, but that care must be exercised in the 
selection of the route and the application of motive power 
on the road, and recommended in conclusion that a deputa- 
tion be sent abroad to examine the railroads in England. 
Following out this advice, Jonathan Knight, an engineer, 
and Captain W. G. McNeill, of the U. S. Topographical 
Corps, were sent abroad in the autumn of 1828, and return- 
ing in the spring of the following year, reported that their 
examinations of the English railroads led them to approve 
the surveys made and route proposed for the Baltimore and 
Ohio Railroad. 

^ See note, p. 13. 



289] Baltimore and Ohio Railroad, 1827-1853. 15 

In the meantime the task of drawing up a charter of incor- 
poration for the proposed enterprise had been given to John 
Van Lear M'Mahon, a young lawyer of twenty-seven, who 
was at this time a delegate from the city of Baltimore to the 
Maryland legislature. The charter which he drew up was 
in all probability the first of its kind in America/ In con- 
sequence it is of enough interest to the student of transpor- 
tation to merit a brief analysis. 

The act to incorporate the Baltimore and Ohio Railroad 
Company was passed February 28, 1827. This act, which 
constituted the charter of the company, contained twenty- 
three sections. The earlier sections dealt mainly with the 
stock and the stockholders. They provided that the capital 
stock of the company should be three million dollars, in 
shares of one hundred dollars each, of which ten thousand 
shares should be reserved for subscription by the state of 
Maryland "^ and five thousand for subscription by the city of 
Baltimore ' for the space of twelve months after the passage 
of the act. The remaining fifteen thousand shares were to 
be subscribed by individuals or corporations. As soon as 
ten thousand shares were subscribed the company was 
declared to be established with all the powers, rights and 
privileges conferred by the act. If more than fifteen thou- 
sand shares were subscribed, the subscription was to be 
reduced to that number by striking off from the largest 
. number of shares or reducing all subscriptions to one share. 
If there were more than fifteen thousand different subscrip- 
tions, lots were to be drawn to determine which were to be 
excluded. One dollar was to be paid on every share at the 
time of subscribing, and the residue was to be paid in instal- 
ments; provided, however, that not more than one-third of 

^ Acts of Maryland Assembly, 1826, chapter 123. 

- $500,000 subscribed under Act 1827, ch. 104; additional subscrip- 
tion of $3,000,000 by Act 1835, ch. 395. 

3 $500,000 subscribed under Resolutions of 1827, No. 41 ; additional 
subscription of $3,000,000 under Act of Assembly, 1835, ch. 127, and 
Resolutions of 1836, No. 40. 



16 The Economic History of the [290 

the subscription was to be demanded in any one year from 
the commencement of the work, nor any payment until at 
least 60 days' public notice of demand for payment had been 
given. Stock was forfeited in case any subscriber failed to 
pay any instalment within 60 days after it had become due. 

Nine commissioners were appointed to receive the sub- 
scriptions to the capital stock, and they were to keep the 
books open for this purpose for at least ten successive days. 
The stockholders were then to elect twelve directors by 
ballot, and these in turn to elect a president. Each stock- 
holder was allowed one vote for every share of stock owned 
by him, and voting by proxy was authorized. If the stock 
reserved for subscription by the state of Maryland and the 
city of Baltimore was not subscribed, provision was made 
that such stock could be disposed of by the president and 
directors for the benefit of the company for any sum not 
under its par value. 

The administration of the railroad was vested entirely 
in the president and board of directors. They had power 
to appoint all the officers, engineers, agents, etc., whom they 
might deem necessary to transact the business of the com- 
pany, with full powers of removal at will of all these em- 
ployees. Further, they had power to make by-laws regu- 
lating the manner of adjusting and settling all accounts 
against the corhpany, regulating the manner and evidence 
of transfers of the company's stock, and indeed for exercis- 
ing all the powers vested in the company by the act of 
incorporation. 

An important power was given to the president and 
directors by the thirteenth section, by which they were 
allowed to increase the capital stock of the company by the 
addition of as many shares as they might deem necessary, 
with the restriction, however, that they must not be sold 
below their par value. Power to borrow money and to 
issue mortgage bonds therefor was also granted. 

The intention of the organizers of the company to build 
a through line from Baltimore to the Ohio river is clearly 



291] Baltimore and Ohio Railroad, 1827-1853. 17 

shown by the grant of power to construct such a road. The 
right of eminent domain was given to the president and 
directors, not only as regards land, but also as regards 
materials needed in the construction of the road. Adequate 
provision was, of course, made to reimburse owners for 
property taken by the railroad company. 

There were certain restrictions put upon the powers of the 
company. If the road was not begun within two years from 
the time of the passage of the act and completed within 
Mar\dand within ten years after the time of commencement, 
the act was declared null and void. Full right and privilege 
were reserved to the citizens of Maryland to connect with 
the Baltimore and Ohio any other railroad leading from the 
main line to any other part of the state. It was provided 
further that whenever the Baltimore and Ohio crossed or 
intersected any other road or way, the railroad must be 
built so as not to impede the passage or transportation of 
persons or property along the intersected road. 

Power was granted the company to place on the railroad 
" all machines, wagons, vehicles or carriages of any descrip- 
tion whatsoever which they may deem necessary or proper 
for the purposes of transportation." The company was 
allowed to charge " tolls " upon goods transported over the 
railroad as follows : " On all goods, produce, merchandise or 
property- of any description whatsoever transported by them 
from west to east, not exceeding one cent a ton per mile for 
toll, and three cents a ton per mile for transportation; on 
all goods, produce, merchandise or property of any descrip- 
tion whatsoever transported by them from east to west, not 
exceeding three cents a ton per mile for tolls and three cents 
a ton per mile for transportation ; and for the transportation 
of passengers, not exceeding three cents per mile for each 
passenger." From this quotation it is easy to see that the 
railroad was regarded as a new and improved kind of toll- 
road. This is shown also by a provision enacting that no 
person should travel upon or use the road of the company 
for transportation without permission from the officers. 



18 The Economic History of the [292 

As regards taxation, it was provided that the shares of the 
capital stock of the company should be deemed personal 
estate and should be exempt from the imposition of any 
tax or burden by the state's assent to the act of incorpora- 
tion. The Court of Appeals of the state of Maryland^ later 
decided that under this section of the act the property of 
the road of every description should be exempt from taxa- 
tion. 

Provision was also made in the charter for the declaration 
by the company of annual or semi-annual dividends out of 
** the nett profits arising from the resources of the said com- 
pany after deducting the necessary current and probable con- 
tingent expenses," to be divided among the stockholders 
according to their holdings. Wilful injury done to the road 
was to be punished by fine or imprisonment, or both, in the 
discretion of the court in which the offender was tried. 

Power to open subscription books, to sell stock and to 
organize the company was given as soon as the act was 
passed by the legislature of Maryland. 

The citizens of Baltimore were fully alive to the local 
significance of a direct line of communication with the great 
agricultural and mineral regions of western Maryland and 
Ohio. It was estimated that the district which would de- 
pend mainly upon this road for the conveyance of its pro- 
ducts contained a population of about two million persons, 
or nearly one-fifth of the total population of the United 
States at this time. Many products of the country west of 
the Alleghany mountains were of little value in those 
regions owing to the heavy expense of shipping them to 
a market, and it was understood that a railroad would lead 
to larger shipments and the trade of Baltimore be greatly 
increased thereby. 

As a consequence, although the subscription books were 
open only twelve days, from March 20, 1827, until March 
31, at the Mechanics' Bank in Baltimore, at the Farmers' 

^Tax Cases, 12 Gill & Johnson, 117. 



293] Baltimore and Ohio Railroad, 1827-1853. 19 

Branch Bank in Frederick, and at the Hagerstown Bank in 
Hagerstown, yet in Baltimore alone 41,788 shares were sub- 
scribed (including the 5000 shares taken by the city of Bal- 
timore). These shares subscribed represented 22,000 indi- 
viduals. Large subscriptions were also made at Hagers- 
town and Frederick. But as only 15,000 shares were allotted 
to individuals at this time, the shares were apportioned. 

The Baltimore and Ohio Railroad Company was formally 
organized on April 23, 1827. The first board of directors 
elected by the stockholders consisted of Charles Carroll of 
Carrollton, Philip E. Thomas, William Patterson, Robert 
Oliver, Alexander Brown, Isaac McKim, William Lorman, 
George Hoffman, Thomas Ellicott, John B. Morris, Talbot 
Jones and William Steuart. These elected Philip E. 
Thomas, president of the road, and George Brown, 
treasurer. 

The state of Virginia had confirmed the charter, March 
8, 1827, and the state of Pennsylvania assented to it, Feb- 
ruary 22, 1828. The city of Baltimore was a stockholder 
in the railroad from its beginning, having decided by a 
resolution,"^ approved March 20, 1827, to take the 5000 
shares of stock reserved for it by the company's charter, 
and provision was made for two special directors im the 
company to represent the interests of Baltimore. 

^ Session of 1827, Resolution No. 41. 



20 The Economic History of the [294 



CHAPTER 11. 

Beginning of Construction. Baltimore to 
Harper's Ferry (1828- 1834). 

Immediately after the organization of the company, pre- 
liminary surveys were begun for the location of the pro- 
posed railway. The company's engineers, Colonel S. H. 
Long and Jonathan Knight, were assisted by several mem- 
bers of the U. S. Topographical Survey. After a prelim- 
inary reconnoissance covering almost all the ground within 
the Hmits of Maryland, experimental surveys of three dis- 
tinct routes were made. 

The results of these surveys were communicated to the 
president and directors of the railroad in an exhaustive 
report.^ The report confirmed the opinion that the building 
of the road was entirely practicable, and recommended the 
adoption of the route along the valley of the Patapsco, and 
thence in the direction of Bennett's, Bush or Linganore 
Creek to the Point of Rocks, where the Potomac river 
passes the Catoctin mountain. It was decided that the con- 
struction of the road should be at once begun along this 
route. 

Accordingly on the Fourth of July, 1828, amid a great 
and enthusiastic concourse of spectators, the corner-stone 
of the Baltimore and Ohio Railroad was laid by the vener- 
able Charles Carroll of Carrollton, then more than ninety 
years old. He is said to have remarked to one of his friends 
after the ceremony, " I consider this among the most im- 
portant acts of my life, second only to my signing the Decla- 
ration of Independence, if even it be second to that."^ 

* " Report of the Engineers on the Reconnoissances and Surveys 
made in reference to the B. & O. R. R." Submitted April 5, 1828. 

=*W. P. Smith "History and Description of the Baltimore and 
and Ohio Railroad," p. 20. 



295] Baltimore and Ohio Railroad, 1827-1853. 21 

Three days later the engineers began the definitive location 
of the road. In the Baltimore American for July 14, 1828, 
a notice was inserted by the railroad company to road- 
makers and bridge-builders, setting forth that from August 
I to August II, proposals for grading and masonry on about 
twelve miles of the proposed road would be received at the 
office of the company. Newspapers of other leading cities 
of the country were requested to reprint this advertisement. 

Grading and masonry work were first begun on 11^ 
miles of road. The average cost per mile of this work was 
$17,000. The six miles of road nearest the city cost nearly 
four times as much as the remainder of this block of road, 
because the construction at the city end was begun at an 
elevation of 66 feet above mid-tide and had to be carried 
along at right angles to the courses of the streams. It was 
believed that by beginning the road at such a height and in 
such a direction, further extension would be practicable at 
a very much smaller cost. It was estimated that the cost 
of grading and masonry on the first forty miles would not 
exceed $8,000 a mile, and that with the most liberal allow- 
ance for laying the road with double tracks and completely 
fitting the rails for the reception of carriages and the appli- 
cation of motive power, the total cost per mile throughout 
that distance would not exceed $17,000. These estimates, 
it must be remembered, were made concerning an enter- 
prise regarding the probable cost of which the data were 
meager and uncertain. As soon as the work on the first 
twelve miles was completed, proposals were received for 
masonry and grading for the next twelve miles, and the 
work was rapidly pushed on. 

In the first annual report of the president of the Baltimore 
and Ohio Railroad Company, dated October i, 1827, Mr. 
Thomas had called attention to the fact that the enterprise 
had been generally approved throughout the country, and 
more particularly in those sections of the West immediately 
interested in its success. He had noted the general willing- 
ness of land-holders to give, free of cost, necessary ground 



22 The Economic History of the [296 

for the road-bed. In his second report, a year later, the 
president again remarked with pleasure the free cessions of 
land along the proposed route, as well as the fact that the 
right of quarrying stone had been given to the contractors. 
The proprietors of Ellicott's Mills — now Ellicott City — had 
also donated a tract of ground for a depot. There was but 
one unpleasant fact — a controversy with the Chesapeake 
and Ohio Canal Company, the railroad company's rival, in 
regard to the canal company's alleged pre-emption right to 
certain land between the Point of Rocks and Cumberland, 
along the Potomac river. " This controversy will probably 
not retard our operations in the least degree," wrote Presi- 
dent Thomas in 1828. He was mistaken, for prolonged 
litigation, much expenditure of time, money and patience, 
and the stoppage of the extension of the railroad beyond the 
Point of Rocks for two years, were the consequences arising 
from the efforts of the canal company to check the progress 
of its rival. 

During the year 1828 the capital stock of the company 
was increased from $2,000,000 to $4,000,000 by the addi- 
tional subscription of $1,500,000 by individuals^ and by a 
subscription of $500,000 by the state of Maryland. This 
last-named subscription was obtained mainly through the 
efforts of Mr. J. V. L. M'Mahon, and was doubtless the 
first time in the history of this country that a state had 
granted aid to a railroad corporation. The act authorizing 
this subscription was passed March 3, 1828 (1827, Ch. 104, 
Sec. 3). 

Early in January, 1828, a memorial to Congress had been 
drawn up by the president and directors of the company, 
petitioning for a subscription by the United States to the 
company's stock. The Senate committee to which the 
memorial was referred reported a bill authorizing a subscrip- 
tion of $1,000,000. The committee of the House of Repre- 
sentatives also made a favorable report, but it being late in 

* Original individual subscribers doubled their subscription, March 
6, 1828. 



297] Baltimore and Ohio Railroad, 1827-1853. 23 

the session when the committee reported, it would submit 
no bill. The company therefore renewed its petition at the 
next session of Congress in 1829, but, although the com- 
mittees of both houses of Congress recommended a qualified 
subscription to the company, the measure failed. It was said 
at the time that the reason the company was unsuccessful in 
this application was because of the opposition of the president 
of the Chesapeake and Ohio Canal Company, who was at 
this time chairman of the committee on roads and canals in 
the House of Representatives.^ But it must be remembered 
that there was in 1829 and 1830 considerable honest differ- 
ence of opinion as to whether the United States Constitution 
gave power to the national government to make expendi- 
tures for objects not clearly national in character. Presi- 
dent Jackson had strongly expressed his opposition to aid- 
ing state enterprises and schemes of internal improvement 
by appropriations from the central government. 

From whatever source the opposition may have come, 
the company recognized that it must not hope for aid from 
the national government. By the fall of 1829 the grading 
and masonry upon twenty-five miles of the road had been 
completed, and the first rails had been laid in the early part 
of that year. Owing to the general advance in laborers' 
wages at this time, to the difficulty of procuring stone suit- 
able for bridges and culverts, to the extensive and unex- 
pected beds of rock and hard clay through which the road- 
bed had to be cut, and to the substitution of permanent 
stone bridges or embankments over valleys where it had 
been proposed to make use of wooden viaducts, the cost of 
these twenty-five miles had considerably exceeded the orig- 
inal estimate of $20,000 a mile. An injunction against the 
railroad company by the canal company in this year had 
at first compelled the railroad to cease its extension in Fred- 
erick county. The injunction was, however, partly set aside 
so as to allow the railroad to continue construction to the 



^ W. P. Smith ' ' History and Description of the Baltimore and 
Ohio Railroad," p. 22. 



24 The Economic History of the [298 

Point of Rocks, from which point to Cumberland the owner- 
ship of the proposed routes of the two companies was in 
dispute. 

Upon the twenty-second of May, 1830, the first division 
of the Baltimore and Ohio Railroad — ^thirteen and three- 
quarters miles long, from Baltimore to Ellicott's Mills — was 
opened for the transportation of passengers. The cars 
needed for general traffic, however, were not ready until 
early in June, but after that time the travel on the road was 
constant. By the first of October, 1830, the receipts were 
$20,012.36, although the road had only a single track and 
was able to transport merchandise or produce during a few 
months only. The freight offered for transportation was 
about ten times the amount which the company was able 
to handle. 

The sight presented on that May day in 1830, upon the 
occasion of the opening of the first railroad worthy of the 
name in America, was far less imposing than that presented 
upon a similar occasion to-day. There were merely a num- 
ber of small open carriages, much resembling the old-style 
stage-coaches, with wheels so constructed as to enable them 
to run upon the tracks. Horses were used to furnish the 
motive power. 

The mode of locomotive power to be used upon the road 
was by no means decided during the first year of the rail- 
way's existence. Evan Thomas, a brother of the president, 
even experimented with a car which he had fitted with sailsl"^ 

The railroad, being the first of its kind in the country, 

^ Before the experiments with the sailing car the Baltimore and 
Ohio Railroad made use of a " horse-power locomotive." A horse 
was placed in a specially constructed car and made to walk on an 
endless apron or belt and to communicate motion to the wheels by- 
means of cog-wheels. The machine worked fairly well, but one 
day while drawing a car filled with representatives of the press, it 
ran into a cow, the consequence being that the whole affair tilted 
over and rolled down an embankment. No one was badly hurt, but 
the horse-power locomotive passed out of existence from that time. 
Brown, "The History of the First Locomotives in America," 
pp. 123-4. 



299] Baltimore and Ohio Railroad, 1827-1853. 25 

naturally attracted much attention, and people came from 
considerable distances to see and travel upon this new and 
strange road. 

The trial of the first steam locomotive on the tracks of the 
Baltimore and Ohio Railroad took place on August 25/ 1830. 
The locomotive, which was the first intended for railroad 
purposes ever built in America,'' was the invention of Peter 
Cooper. It was scarcely more than a model, weighing but 
a single ton, and was appropriately named the " Tom 
Thumb." It was about the size of the hand-cars now used 
by workmen upon the railroad. The boiler was a small 
upright one, about the size of a modern kitchen boiler; its 
cylinder measured but three and a half inches in diameter, 
and its speed was gotten up by gearing. In order to secure 
the necessary steam pressure, a sort of bellows was used, 
which was worked by a pulley and cord passing over a 
drum on one of the car wheels. This crude machine was 
able to pull an open car of small dimensions from Baltimore 
to ElHcott's Mills, thirteen miles, in an hour and twelve 
minutes, and the return trip was made in fifty-seven minutes. 
But during a race which this engine had the same day with 
a similar car drawn along a parallel track by a stage horse, 
the band working the bellows of the engine slipped and 
steam-power was ignominiously beaten by horse-power. 



^ Or Aug. 28, 1830. Saturday, according to W. H. Brown (p. 
114). This account was given to Brown by Winans, who was 
present upon this occasion. Cooper had tried some experimental 
trips with his locomotive in 1829, but it did not act as well as he 
had expected and desired, so he changed his plan, and after some 
delay made his first real experimental trip in 1830. 

The Tom Thumb was built at the Mt. Clare works in 1829 
(Brown, pp. 107, 108). 

* Upon the whole subject of early locomotives and railroads in 
America, see the work of W. H. Brown (N. Y., Appleton & 
& Co., 1871), " The History of the First Locomotives in America." 
On Peter Cooper's " Tom Thumb " see especially pages 107 to 122 
inclusive, containing a cut of the engine and an extract from a 
lecture delivered by Mr. H. B. Latrobe, legal counsellor of the 
company, before the Maryland Institute in 1868 upon the history 
of the Baltimore and Ohio Railroad. 



26 The Economic History of the [300 

Nevertheless the tiny engine was used for some time with 
success upon the road. 

The question of granting to the company the privilege of 
laying tracks through the city of Baltimore from its depot 
on Pratt street near Poppleton to the basin or harbor, so 
as to facilitate the transportation of goods intended for ex- 
port, directly to the vessels into which they were to be 
loaded, was a question which caused many heated contro- 
versies. In spite of all opposition the company prevailed, 
and in April, 1831,^ the City Council gave permission to lay 
the proposed tracks to the basin and thence parallel to the 
entire water-front of the city as far as Jones Falls. At this 
point, the city conveyed to the company two squares of 
ground very favorably situated for the economical and con- 
venient transaction of the business of the railroad. 

The work of finishing the railroad as far as the Point of 
Rocks had meanwhile been going steadily on, and on 
December i, 1831, the road was opened to Frederick, a dis- 
tance of 61 miles. Frederick was not directly upon the 
main stem of the road, but was connected with it by a 
branch road 35^ miles long. On April i, 1832, the road 
was opened to the Point of Rocks. Including the Frederick 
branch, this made 723^ miles of the road in active use after 
this date. With the double track, switches, sidings, etc., 
130^ miles of track had now been completed. 

The extension of the railroad to the Point of Rocks 
had an immediate effect upon that place. Several ware- 
houses were erected; inns, dwellings and other improve- 
ments rapidly rose. The facilities for the transference of 
produce from the Potomac river to the railroad were ample, 
and the boatmen and farmers further to the west resorted 
more and more to the Point of Rocks as the most conveni- 
ent spot from which to reach the Baltimore market.^ It was 
stated also that every species of agricultural product, lime, 

* By act of Baltimore City Council, Session of 1831, Ordinance 
Ko. 18. Approved April 4, 1831. 

2 Sixth Annual Report of the B. & O. R. R. Co. (1832), p. 4. 



301] Baltimore and Ohio Railroad, 1827-1853. 27 

timber of various kinds, and even paving-stones had been 
brought to Baltimore with profit to those making use of the 
road. In return (although at an enhanced toll, yet still with 
equally profitable results) plaster of paris, coal, boards, 
bricks and scrap iron had been sent into the interior. The 
existence of the road had also brought into use articles, in 
the sparsely settled country through which the railroad 
passed, which had before been valueless to their possessors. 
Forests and quarries hitherto useless became sources of new 
profit to the owners. 

The mode of construction of the road to the Point of 
Rocks was various and was in the nature of a series of 
experiments.^ The combination of the iron rail on granite, 
the wood and iron rail on stone blocks, the wood and iron 
rail supported by broken stone, the same supported by lon- 
gitudinal ground-sills instead of broken stone, the log rail 
formed of trunks of trees worked to a surface on one side 
to receive the iron and supported by wooden sleepers, and 
the wrought-iron rails in use on the English railroads, had 
all been tried and formed at this time parts of the work. In 
general, stone, wherever easily obtainable, had been pre- 
ferred to wood for supporting the rails, because of its sup- 
posed greater durability, but subsequent experience proved 
that this preference was without good reason. 

By this time any question as to the suitability of the rail- 
way as a . mode of transporting persons and merchandise 
was practically settled by the successful operation of this 
road. The important question to settle was the kind of 
locomotive needed. It was evident that horses would not 
suffice for the long distances and the heavy traffic, and that 
steam must be employed. It was thought that the English 
locomotives were not adapted to this American railway, 
with its steep grades and sharp curves — some of them not 
more than 400 feet in radius. The Peter Cooper engine was 

^ Almost total reconstruction of this portion of the railroad was 
necessary within 10 years. 



28 The Economic History of the [302 

altogether inadequate. It was determined to advertise for 
American locomotives. 

On January 4, 1831, the company published a notice offer- 
ing $4,000 for the most approved engine which should be 
delivered for trial upon the road on or before June i of the 
same year, and offering $3,500 for the engine adjudged the 
next best. It was specified, among other things, that these 
engines must burn coke or coal; must consume their own 
smoke; must not exceed three and a half tons in weight; 
be capable of regularly drawing on a level road fifteen tons 
fifteen miles per hour; steam pressure not to be over 100 
pounds per square inch; company to have the right to test 
boilers, fire-tubes, cylinders, etc.; each engine to be pro- 
vided with two safety valves, one of them out of reach and 
control of the engineer; engine and boiler to be supported 
on springs and to rest on four wheels, with the top of the 
chimney not more than twelve feet from the ground, and to 
be fitted with a mercurial gauge with index to show the 
steam pressure above fifty pounds per square inch and 
constructed to blow out at 120 pounds, etc., etc. 

When the time specified for the trial had arrived, three 
locomotives were submitted for competition. But one, called 
" The York," (from its having been built at York, Pa.), stood 
the test. It had been built by Davis and Gartner and 
weighed 35^ tons. It was mounted on wheels such as those 
on the common cars, thirty inches in diameter, and ordin- 
arily made the trip between Baltimore and Ellicott's Mills, 
drawing four cars, making up a gross weight of 14 tons, 
in one hour. On straight parts of the road and for short 
distances it had reached the speed of thirty miles an hour. 
It easily ran over curves as small as 400 feet radius, but 
owing to its light weight was of little use when heavy grades 
were to be ascended. The success of this engine and the 
satisfaction that it gave in its regular use after its trial led 
President Thomas to remark in his annual report in 1832 
that the engine was but " as the commencement of a series 
of experiments which will even more fully than has yet been 



303] Baltimore and Ohio Railroad, 1827-1853. 29 

done, prove the adaptation of steam and railroads to every 
part of our country and for all purposes of trade and travel." 
During 1832 a number of other mechanics and inventors 
were engaged in the construction of locomotive engines. 
Davis and Gartner placed a second engine, the " Atlantic," 
upon the rails of the Baltimore and Ohio Railroad during 
that year, and this engine proved quite as successful as their 
first one. 

In 1832 tlie controversy so long pending between the 
Chesapeake and Ohio Canal Company and the Baltimore 
and Ohio Railroad Company came to a final settlement. 
The Court of Appeals by a vote of three judges to two — ^the 
sixth judge of the court being ill and not voting — reversed 
the decision of the Chancery Court of Maryland and sus- 
tained the contention of the canal company in its claim to 
a prior right of way between the Point of Rocks and Harp- 
er's Ferry. The railroad company was not to appropriate 
or use the land between these points until the canal company 
had laid out its route. It was believed that the canal com- 
pany would probably use so much of the narrow available 
space between these points as to exclude the railroad. 

The railroad company, beaten in the courts, had still sev- 
eral alternatives left. It might continue the road alongside 
the canal between the two points in question upon such 
ground as the canal company might leave vacant; it might 
cross the Potomac river at the Point of Rocks and con- 
tinue its line along the Virginia shore of the river; it might 
tunnel through the mountain spurs; finally, it might succeed 
in procuring permission from the canal company to con- 
struct jointly the two works from the Point of Rocks to 
Harper's Ferry. 

The last-named plan was the first one tried. While the 
case had still been in the Chancery Court, the chief engi- 
neers of the two companies, acting as commissioners of the 
court, had reported that from surveys made by them the 
plan was feasible and that its execution would involve an 
increased cost of about $7,000 to each company. In the 



30 The Economic History of the [304 

proposition submitted by the railroad company to the canal 
company, the former offered to bear the whole increased 
expense of the undertaking ($14,000) if the canal company 
would permit the proposed joint construction. This offer 
the canal company declined, on the ground that it might 
work harm to the canal. 

The legislature of Maryland now intervened. Both enter- 
prises were of too much value to the state and to the country 
at large to permit the usefulness of either tO' be impaired by 
friction between them. A resolution was first passed by 
both houses of the legislature urging an accommodating 
spirit upon the canal company towards the railroad company 
and a modification of the plan of the canal so as to permit 
the joint construction of both enterprises. In answer to 
this appeal the railroad company offered to construct the 
canal at the price at which it had been put under contract, 
to complete it by a fixed date, to guarantee it to stand for 
five years, and to keep it in thorough repair during that time. 
To this offer the canal company proposed that the railroad 
company should devote the unexpended portion of its capi- 
tal to the completion of the canal to Cumberland and 
abandon for the time all idea of continuing the railroad 
beyond the Point of Rocks. 

The railroad immediately rejected this offer as unreason- 
able. Things were, therefore, again at a standstill. In the 
legislative session of 1832-33 the Committee on Internal 
Improvements in the House of Delegates was directed to 
examine the region in question and to report upon the feasi- 
bility of joint construction of the two works. This report 
was so hostile to the canal company that relations became 
all the more strained. Matters looked very dark for the 
extension of the railroad in Maryland, when it was pro- 
posed to appoint a joint committee of the two branches of 
the legislature for the purpose of harmonizing the differ- 
ences between the two companies without attempting to 
force concessions. 

The proposition was favorably received, the committee 



305] Baltimm^e and Ohio Railroad, 1827-1853. 31 

was organized, and investigations were made with the co- 
operation of the companies interested. A report, embody- 
ing a compromise, was submitted, and a law, practically the 
same as the compromise report, was passed by the legisla- 
ture, March 22, 1833. 

By this law the consent of the canal company to the joint 
construction of the railroad with the canal through the 
region bet^veen the Point of Rocks and Harper's Ferry was 
recorded. It was provided, too, that when completed to 
Harper's Ferry the railroad was to subscribe for 2,500 shares 
of the stock of the canal company, and that the railr.oad com- 
pany was to be allowed to begin the construction of its road 
at the Point of Rocks at any time after May 10, 1833. The 
canal company was bound to prepare the road-bed through 
the passes of the Point of Rocks for one hundred thousand 
dollars and to bear the expense of any additional cost of 
grading. The width of the canal was to be maintained at 
fifty^ feet, but if the railroad became impracticable at any 
point in the passes with the canal fifty feet wide, its width 
might be contracted to forty feet, if the commissioners — • 
provided for in a subsequent part of the law — deemed neces- 
sary. The canal company was given the right to grade the 
road-bed within a limited time, preserving a greater width 
for the canal than forty feet if it differed in opinion with the 
commissioners. 

The railroad, on the other hand, was to have a breadth of 
not less than twenty feet through the passes of the Point of 
Rocks, and a curvature of not less than 400 feet radius, and 
a grade not greater than thirty feet to the mile. To deter- 
mine points at issue between the two companies, as to the 
construction of the road, a board of commissioners was to 
be created, composed of three engineers, one to be chosen 
by the canal company, one by the railroad company, and 
the third by the President of the United States. These 
commissioners were to determine the damages payable by 
the railroad company to the canal company for any inter- 
ruption — during the construction or in consequence of it — • 



32 The Economic History of the [306 

of the use of any part of the canal. It was provided, too, 
that a fence was to be erected, under the direction of the 
commissioners, between the two works, sufficient to secure 
the horses used on the canal from accidents from the pas- 
sage of the locomotives. It was found, however, that a 
fence was out of the question, because it would act as a 
barrier to the free flow of melted snow and mountain wash- 
ings which would thus accumulate and flood the tracks. 
Therefore the railroad company was obHged to use horses 
to draw its cars between the Point of Rocks and Harper's 
Ferry until the objectionable clause was repealed. 

Under this comproimise act the railroad company paid the 
canal company $266,000 in monthly instalments, which 
amount President Thomas of the Baltimore and Ohio said 
that he did not consider more than sufficient fully to cover, 
as was intended, the cost of construction of those portions of 
the railroad which the canal company had undertaken to 
build, as well as to indemnify it for the loss and damage 
to which the canal company, during the period of construc- 
tion, must necessarily be subject. Besides it was important 
for the railroad to reach Harper's Ferry as soon as possible.* 
Among the chief reasons for this was, that at that point 
was the northern terminus of the Winchester and Potomac 
Railroad, which bade fair to transfer to the Baltimore and 
Ohio Railroad at Harper's Ferry, the passengers and pro- 
duce gathered along its thirty miles of route in Virginia. 
Winchester, itself a thriving town, would be brought thus 
into close connection with Baltimore, probably to the mutual 
advantage of the two places. 

Persons who had invested their money in the railroad 
were evidently becoming impatient for some returns, for 
President Thomas in his report in 1833 remarked that the 
board of directors saw that much was still to be done before 
those pecuniary advantages originally anticipated could be 
realized to the stockholders. Indeed, instead of having 

^ Seventh Annual Report of the B. O. R. R. Co., p. 5 (1833). 



307] Baltimore and Ohio Railroad, 1827-1853. 33 

money to distribute among the stockholders, the need of 
funds to continue the construction of the railroad was so 
urgent that at the session of the Maryland legislature of 
1833 the state treasurer was authorized to pay to the com- 
pany the whole of the state's subscription to the stock. The 
Mayor and City Council of Baltimore also having passed 
an ordinance to the same effect as regarded the city's shares 
of stock, the company found itself in possession of the neces- 
sary resources to continue the road to Harper's Ferry. The 
canal company having built the railroad through the passes 
of the Point of Rocks, and the railroad company, with the 
necessary additions to its resources, having been able to con- 
tinue the construction at the point the canal company had 
left it, the whole route to Wager's Bridge, a point opposite 
Harper's Ferry on the Maryland side of the Potomac, was 
opened on December i, 1834. Here the further progress 
of the railroad ceased until the summer of 1836, when sur- 
veys for the extension of the road westward were begun. 

Although there was a general decline in the business of 
the country at large during 1834, yet there was a steady 
increase in the business of the Baltimore and Ohio Railroad. 
To this the president of the railroad calls attention in his 
report for that year,' saying that this increase was not attri- 
butable to the augmentation of business from any one place, 
but due rather to the multiplication of places with which 
trade was carried on by means of the railroad. The ex- 
penses of the railroad had also been reduced by the econo- 
mical employment of steam power. 

As the Baltimore and Ohio Railroad was the foremost of 
the railroads in America, it had to solve many problems in 
the technique of railroading during the early years of its 
existence, and many improvements in locomotives, rolling 
stock and road-building were introduced by the engineers 
and mechanics of the road. 

Beginning in 1830, experiments were made to test the 



' Eighth Annual Report of the B. & O. R. R. Co. (1834), P- 12. 



34 The Economic History of the [308 

comparative resistance of cars equipped with the Winans 
anti-friction boxes and those with hardened steel journals 
and chilled bearings. The friction on a straight, level road 
was found to amount to ^k^ of the load in the case of the 
latter equipment and to -^ part of the load with the Winans 
invention. The combined cylindrical and conical car wheels, 
which allowed cars to go safely around sharp curves of a 
small radius, and which were especially useful in turning 
the corners of city streets, were the invention of Jonathan 
Knight, then chief engineer of the road.^ When locomo- 
tives took the place of horse-power, the light coach wheels 
were replaced by cast-iron wheels, to the perfection of which 
Ross Winans, John Elgar, Jonathan Knight and Phineas 
Davis all contributed. Thousands of these cast-iron wheels 
were made at Ross Winans' shops, not only for American 
roads, but also for export for German and Swiss roads, 
where they were used up to 185 1. 

Next to the improvements in steam locomotives during 
these years the most striking development was probably 
that made in the cars. These, built originally very like the 
stage-coaches of the day and mounted on four light cast-iron 
wheels, were gradually changed and improved, owing to the 
demands for greater steadiness and convenience in coaches, 
until in his report dated October i, 1833, the superintendent, 
Ross Winans, announced that he was building three car 
bodies to form one coach on eight wheels to carry sixty 
passengers. This was the beginning of the modern eight- 
wheel car.^ Soon after, eight-wheel cars were used througK- 

^ The credit for this invention was claimed by James Stimpson, 
an inventor, originally from Massachusetts, who was also the in- 
ventor of jointed axles for railroad cars, and who claimed that he 
had invented the mode of placing rails so that cars could with 
safety go around the small curves of city streets. James Stimpson 
had a long series of suits in the courts in order to protect his 
inventions, some of which suits he won. 

'^ Winans patented the eight-wheel car, but the courts decided 
adversely to his claim, on the ground of prior use, in that two 
four-wheel cars connected by a pole and " bolster " (the use of 
which on the B. & O. to carry 40-foot timber stringers had sug- 



309] Baltimore and Ohio Railroad, 1827-1853. 35 

out the line for both passenger and freight traffic, and spe- 
cial cars were provided for baggage, which had before this 
time been carried in racks upon the tops of the coaches. 

In September, 1832, steel springs were first placed upon 
the locomotive " York " and its tender, which experiment 
was so successful that springs of steel were also put on 
some freight cars with equal success. By the summer of 
1833 it was thought advisable for the company to begin the 
manufacture of its own engines and to keep them in repair, 
rather than have all these things done by contract, as had 
theretofore been the case. Accordingly the company began 
to erect shops in Baltimore where the great Mount Clare 
works now stand. Up to July, 1834, the company had had 
but three locomotives, the ** York," the " Atlantic," and the 
*' Franklin." Many cars, especially freight cars, were still 
drawn by horse or mule power. By the fall of 1834 five 
more locomotives, all American built — the " Traveller," 
"Arabian,"' "Mercury," "Antelope" and "American," the 
last two having been built in Baltimore — ^were put upon the 
road. Eight more locomotives had been ordered and were 
then under contract. 



gested the idea of an eight-wheel car to Winans) had already been 
generally used, as well as a similar arrangement for transporting 
large blocks of granite at Quincy, Mass. Cf. Address of Prest. 
Mendes Cohen before American Society of Civil Engineers, 1892, 
p. 551 of the " Proceedings," etc. 
^ This was' the type of the famous " Grasshopper engine." 



36 The Economic History of the [310 



CHAPTER III. 

Extension. Harper's Ferry to Cumberland. 
(1834-1842.) 

By the compromise with the Chesapeake and Ohio Canal 
Company the Baltimore and Ohio Railroad Company had 
agreed not to continue its road along the banks of the 
Potomac beyond Harper's Ferry until the canal should be 
finished to Cumberland, provided that this were done within 
the time allowed by the charter of the canal company. The 
route to the West through Virginia was open to the railroad, 
but the president and directors did not at this time deem 
it advisable to extend their railroad through that state. 

The eight annual report of the railroad (1834) announced 
that in the opinion of the board of directors " the immediate 
interest of the stockholders as well as of the city of Balti- 
more and the state of which Baltimore is the heart and 
emporium, now lies in the completion of the Chesapeake 
and Ohio Canal to Cumberland. For the present, therefore, 
the board would not think of making the railroad parallel 
to the canal, even if it had the power, but taking up the 
route where the canal terminates at Cumberland, would 
push the railroad across the mountains upon the trace 
originally intended for it and to the point of its original 
destination. The two enterprises would then be united in 
interest, instead of hostile, and jointly afford the desired 
communication from Baltimore to the West."^ This plan 
was, however, not carried out. 

In the last report issued by Philip E. Thomas as presi- 
dent of the railroad company,^ attention is called to the fact 
that in spite of many obstacles the business of the road had 

' Eight Annual Report B. & O. R. R. Co. (1834), pp. 14-15. 
■ Ninth Annual Report B. & O. R. R. Co. (1835), p. 4. 



311] Baltimore and Ohio Railroad, 1827-1853. 37 

increased during the fiscal year ending October i, 1835. 
Acknowledgment is made of the liberal policy of those 
Baltimore merchants to whom the new trade of the 
interior of the state and the West generally had been 
directed, and of their title to the thanks of the railroad com- 
pany and the community generally for the efforts they had 
made to render the Baltimore market popular and attractive 
in those sections of the country where hitherto it had been 
but little known. 

This was a time of considerable activity in railroad con- 
struction. The Baltimore and Port Deposit Railroad when 
completed would connect with a system of railroads running 
from Port Deposit through Philadelphia to New York, 
giving a through route from that city to Washington, or 
from New York through Baltimore and via the Winchester 
and Potomac Railroad — with which the Baltimore and Ohio 
Railroad was now practically connected — to Winchester, 
situated in the heart of Virginia, about 115 miles from Bal- 
timore. The town of Chambersburg in Pennsylvania 
desired to secure connection with these arteries of com- 
merce and asked for an examination of the country be- 
tween that place and the terminus of the Baltimore and Ohio 
Railroad at Harper's Ferry. In accordance with this re- 
quest, Benjamin H. Latrobe, later the chief engineer of the 
Baltimore and Ohio Railroad, was detailed for the duty. He 
reported that a railroad 45 miles long would connect the 
two points, and that one inclined plane with stationary 
power would be necessary. The cost of such a road he 
estimated at about $10,000 per mile. However, nothing 
more was done in regard to this proposed road at this time. 

The cities of Pittsburgh and Wheeling were both desirous 
of being connected with Cumberland by railroad. At the 
request of the people of Wheeling, Jonathan Knight, the 
chief engineer of the Baltimore and Ohio Railroad, made 
a reconnoissance between these points in the summer of 
1835. He reported that the mountains between Cumber- 
land and the western waters could be passed by locomo- 



38 The Economic History of the [312 

tives and their trains without the use of stationary power or 
inclined planes, and that a road to Pittsburgh was just as 
practicable as one to Wheeling. The directors of the Bal- 
timore and Ohio Railroad were of the opinion that the 
means by which these proposed roads were to be constructed 
ought to come from all those interested in the completion 
of the work, since such a line would be for their mutual 
advantage. Therefore it was proposed that the state of 
Maryland, the city of Baltimore and individual subscribers 
should furnish the means to build the railroad from Harper's 
Ferry to Cumberland, and that Pittsburgh and Wheeling 
should supply the funds necessary for the construction of 
their respective branches from Cumberland. The total 
expense of building these proposed roads was roughly esti- 
mated at $4,600,000. Some time before, the city of Wheel- 
ing had tendered a subscription of $500,000 for this purpose. 
This plan was not immediately carried out, although the 
railroad was completed to Wheeling in 1853, and later on to 
Pittsburgh via the Pittsburgh and Connellsville Railroad, a 
branch of the Baltimore and Ohio. In both cases aid for 
the construction of the road came from the city to which 
the railroad was extended. 

At the December session of the Maryland legislature of 
1835-36 the board of directors of the railroad asked for aid 
from the state in order to complete the railroad to Pitts- 
burgh and to Wheeling, and at about the same time a 
similar application was made to the Mayor and City Council 
of Baltimore. The city responded by resolving to subscribe 
the sum of three million dollars ($3,000,000) to the capital 
stock of the company whenever the legal difficulties^ which 
prevented at that time the extension of the railroad in an 
unbroken line from Harper's Ferry to the western waters 
should be removed. In the legislature the bill to aid the 
railroad was opposed and postponed until the extra May 
session. In the meantime a largely attended convention 

^ Agreement with the Chesapeake and Ohio Canal Company. 



313] Baltimore and Ohio Railroad, 1827-1853. 39 

was held in Baltimore, to which delegates from Pittsburgh 
and Wheeling came, and in which various subjects con- 
nected with the internal improvements of the state v/ere 
fully discussed. 

One result of this convention was that at the May session 
of the legislature a law^ was passed, containing among other 
subscriptions for the furtherance of internal improvements 
in Maryland, one of three million dollars ($3,000,000) to 
the capital stock of the Baltimore and Ohio Railroad. The 
same law released the company from the restrictions that 
prevented the extension of the railroad westward from 
Harper's Ferry, and thereby enabled it to comply with the 
condition annexed to the subscription by the Mayor and 
City Council of Baltimore. But before the law could go 
into effect the assent of both the Chesapeake and Ohio 
Canal Company and the Baltimore and Ohio Railroad Com- 
pany was necessary. The consent of the railroad company 
was, of course, immediately forthcoming at a general meet- 
ing of the stockholders, July 18, 1836. Not so, however, 
with regard to the canal company. Old jealousies and con- 
tentions had not been forgotten and the canal company took 
no action in the matter. The directors of the railroad com- 
pany were authorized by the stockholders to endeavor to 
secure the canal company's assent to the law. The directors 
of the railroad finally succeeded by means of a written agree- 
ment in removing the apprehensions of the canal company 
that any of the provisions of the law regarding the joint con- 
struction of the railroad and the canal would, if carried into 
operation, materially impair the permanence or usefulness 
of the canal, and after considerable delay the law went into 
effect. The subscription of the state treasurer for 30,000 
shares was received September 23, 1836, and that of the 
Mayor of Baltimore, September 27, 1836. 

The subscription of $3,000,000 by the state was made to 
depend upon certain important conditions. The stockhold- 

^ Acts of 1835, ch. 395. Passed June 4, 1836. 



40 The Economic History of the [314 

ers of the railroad company in general meeting were to 
bind the company in a written agreement to guarantee to 
the state of Maryland after the expiration of three years 
from the payment by the state of each of the instalments 
on the stock subscribed, the payment from that time on, 
out of the profits of the company, of six per cent per annum, 
payable semi-annually, on the amount of the money paid to 
the company, until the clear annual profits of the railroad 
should be more than sufficient to discharge the interest 
payable to the state of Maryland, and adequate, besides, to 
a dividend of six per cent per annum among its stock- 
holders. Thereafter the state was to receive upon the stock 
it held a perpetual dividend of six per cent per annum out 
of the profits of the company as declared from time to time, 
and no more, and all the profits above six per cent per 
annum were to be distributed among the other stockholders 
according to their interests in the company. In considera- 
tion of this guarantee of interest to the state, the railroad 
company was authorized to increase the charge for trans- 
portation of passengers to any amount not exceeding one 
cent per mile for each person, in addition to the charge 
already authorized to be made by the company, making the 
aggregate fpur cents per person per mile. 

The guarantee required of the stockholders was given at 
a general meeting held in Baltimore, July i8, 1836.^ 

^ This " preferred stock " has had an interesting history. The 
state of Maryland paid its subscription in 5 per cent sterling 
bonds, which could not be sold advantageously for many years. 
At the time of the receipt of the bonds the company charged itself 
on its books with the bonds at their face value, $3,200,000. The 
account stood in that form until September 30, 1853, when it was 
closed with an entry of $3,000,000 to " preferred stock " and the 
transfer of $200,000 to the account of " Interest west of Cumber- 
land." This " preferred stock " was sold by the state of Maryland 
(Md. Laws, 1842, ch. 301), and eventually about $1,000,000 worth 
came into the possession of the Johns Hopkins University. Six 
per cent interest was paid on this stock until the half-year ending 
June 30, 1896, when further payment was refused. This has led to 
the case now in the Circuit Court of the United States for the Dis- 
trict of Maryland (The Mercantile Trust Company vs. The Balti- 



315] Baltimore and Ohio Railroad, 1827-1853. 41 

The president's report for 1836 reveals the unsatisfactory 
financial condition of the road. The following table of rates 
is quoted to show, by comparison with charges authorized 
by the laws of other states, that the rates on the Baltimore 
and Ohio as fixed by law were too low. 

T,„.i,__^_ Persons Goods per ton 

Railroads. per mile. per mile. 

Petersburg 5 cents. 10 cents. 

Winchester and Potomac . 6 7 

Portsmouth and Roanoke 6 8 

Boston and Providence. .5 10 

Boston and Lowell 3^^ 7 

Mohawk and Hudson ... 5 8 

Baltimore and Ohio.i ^^ ^ Bastwardiy 4 

( New ^ Westwardly 6 

In the absence of competition other than the Chesapeake 
and Ohio Canal, the railroad might profitably have raised 
its rates much higher had there been no legal restriction. 
As it was, not only was no dividend declared during the 
fiscal year ending October i, 1836, but the six million dol- 
lars subscription of the city and state not having been avail- 
able, an instalment of five dollars per share of stock had to be 
called for. The revenues had fallen of¥ — a sign portentous 
of the crisis of 1837 — and the expenditures had been heavy. 
The cost of constructing the viaduct over the Potomac 
river at Harper's Ferry was very great, and a large and 
constant outlay was required for new engines and cars. 
Extensive repairs had been necessary, for the railroad as 
originally constructed w^as largely experimental and many 
parts of it were ill calculated to stand the strain of the heavy 

more and Ohio Railroad Company et al. in re Johns Hopkins 
University, petitioner), the point of which is to decide whether the 
interest must be paid or whether the provisions of the law of 1836 
have been compHed with and the railroad company released from 
interest payments on this stock unless that interest is earned on the 
whole capital stock of the railroad. 



42 The Economic History of the [316 

traffic for which it soon began to be used. Therefore the 
accruing revenue for these purposes was used in anticipa- 
tion of the payments on instalments of stock. In fact the 
above instalment of $5 had been called for in order to repay 
money borrowed. To offset this, the amount that had been 
applied to construction of the main stem, and not to general 
expenses other than construction, was to be divided by the 
number of shares of stock of the main stem and each share 
credited with its proportion as so much paid in. It was 
contended in this report that the reason that the Baltimore 
and Ohio did not pay was because it was not completed. 
All the railroads in the country that had been completed 
were paying very well, it was claimed. 

The legislature at its extra session in May, 1836, had 
passed another law of importance to the railroad. By this 
act the company was released from its obligation to erect 
a board fence between the railroad and the canal from the 
Point of Rocks to Harper's Ferry as a condition precedent 
to the use of steam between the two places, provided that 
the railroad company would first tender to the canal com- 
pany the price of a " post and rail fence " for that distance. 
As the construction and existence of such a fence had been 
impracticable, the railroad company had been compelled to 
use horse and mule-power between these points at a great 
expense. 

The tenth annual report also gives an account of recon- 
noissances and surveys of the route along the Potomac 
westward from Harper's Ferry and of the country west of 
Cumberland as far as Wheeling. Mention is also made of 
an extension by the Maryland legislature of the time allowed 
for the completion of the main stem of the railroad within 
the state from July 4, 1838 — the time fixed by the act of 
incorporation — to July 4, 1843.^ 

Louis McLane assumed his duties as president of the 
Baltimore and Ohio Railroad in April, 1837, and his first 

^ By acts of 1835, ch. 245. Passed March 28, 1836. 



317] Baltimore and Ohio Railroad, 1827-1853. 43 

report appeared the following October. That the year was 
a critical one is easily read in and between the lines of this 
report. The cost of constructing the main stem had ex- 
ceeded the capital paid in by $202,968.94. This had been 
supplied by using $61,200^ of a million dollar loan negotiated 
by the railroad company and payable January i, 1854, and 
by notes of the company issued to the amount of $141,768.94. 
The last-named amount was to be paid by the two instal- 
ments on the capital stock which were due September 30 
and October 31, 1837, amounting together to $150,000. 

At a meeting of the directors held in July, 1837, a com- 
mittee was appointed consisting of the president and five 
members to investigate fully the affairs of the company, 
to inquire into the practicability of reducing expenditures 
and of providing an efficient and economical organization 
in all departments. It was clear that the road must be in 
a large measure completely and promptly rebuilt in a more 
thorough manner than it had been built at first. It was 
decided that for this reconstruction the portion of the capital 
yet unpaid would furnish the readiest and most certain 
resource. In the then existing condition of the company 
and the money market it was felt that proper reliance could 
not be placed upon loans, even if they could be obtained 
at the heavy rates of interest then current. The revenue 
could thus be devoted to paying a dividend. This cautious 
policy the company followed. 

In the fall of 1837 the sum of $15 was still due upon each 
share of the stock, making in the aggregate $450,000, and 
this was devoted to the reconstruction of the road. The 
stockholders were called upon to pay this sum in instalments 
of $2.50 each in August, September, October and November, 
1838, and in January and March, 1839, respectively. During 
1838 the reduction-of-expenses policy was carried out with 

^ This sum was part of the $1,000,000 loan of 1834 made by the 
Baltimore and Ohio to purchase stock in the Washington Branch, 
and represented the proceeds of the loan not required for the pur- 
pose. It was the first bond issue of the company. 



44 The Economic History of the [318 

success, so that the income of the road exceeded the expen- 
ditures by more than $7,000. During this year also the 
company made active efforts to secure the necessary funds 
and legislation to extend the railroad farther westward. 

In the course of the year B. H. Latrobe made a full and 
careful report of the surveys of the country between Harp- 
er's Ferry and Pittsburgh and Wheeling. He expressed 
the opinion that it was practicable to locate a satisfactory 
route to the Ohio river, embracing both cities, at the maxi- 
mum gradient of 66 feet per mile, and that with a single 
track of the best construction from Cumberland to both 
these points the whole of the work from Harper's Ferry 
ought not to exceed $9,500,000. 

In order to extend the road to Wheeling it was necessary 
to secure the extension of the time during which the rail- 
road company might have the right to build its road through 
Virginia. By the original permission which Virginia had 
given (by the confirmation of the Maryland act of incorpora- 
tion of 1827), the time allowed the railroad to build in Vir- 
ginia expired in July, 1838. After considerable difficulty 
the passage of a law^ was obtained in 1838 extending the 
time five years. But this law provided that the extension 
of time was granted only upon condition that the road be 
carried into Virginia at Harper's Ferry and thence con- 
tinued through that state to a point about five and a half 
miles below Cumberland. It was provided, too, that 
Wheeling was to be one of the termini of the road. Be- 
sides a subscription of $302,100^ which had been made by 
the State of Virginia a short time before, this law author- 
ized an additional subscription by the state of $1,058,420 — 
two-fifths of the estimated cost of so much of the road as 
was required to be built in Virginia between Harper's Ferry 
and Cumberland. By this law the railroad company was 
compelled either to abandon altogether the extension of the 



^ Acts of Virginia Assembly, 1838, ch. 159. Passed April 2, 1838. 
2 Acts of Virginia Assembly, 1836, ch. 136. Passed March 28, 1837. 



319] Baltimore and Ohio Railroad, 1827-1853. 45 

road to Wheeling or to leave the State of Maryland for 
nearly the entire distance between Harper's Ferry and Cum- 
berland. 

The validity of the act of the Virginia legislature depended 
upon its acceptance by the stockholders of the railroad, in- 
cluding the state of Maryland. Preparatory to accepting 
the act it was imperative that it should first be determined 
whether a crossing at Harper's Ferry into Virginia was 
practicable. There were two possible ways for the railroad 
to cross the Potomac river at this point: either to secure 
permission from the Winchester and Potomac Railroad 
Company to occupy and make use of about six miles of its 
road, or to secure permission from the national government 
to occupy a part of the government property at Harper's 
Ferry. The Winchester and Potomac Railroad Company 
refused permission to make use of its road, but in November, 
1838, an agreement was made with the Secretary of War at 
Washington whereby the use of the government land was 
granted to the railroad company. At a meeting of the 
stockholders, November 13, 1838, at which 88,871 shares 
of stock were represented, the Virginia law was accepted. 
The principal reason which induced the stockholders to 
build their railroad outside of Maryland for nearly a hun- 
dred miles was that Wheeling was regarded at that time as 
an indispensable terminus of the road. Other considera- 
tions also operated, such as the trade which was expected 
to come from the fertile valleys of the regions bordering on 
the tributaries of the Potomac river; the avoidance of any 
collision with the Chesapeake and Ohio Canal, then far 
advanced in its construction; and finally, the much greater 
economy in constructing the railroad through Virginia. 

From the surveys and estimates that had been made, it 
was calculated that the difference between the cost of con- 
structing the road through Virginia and through Maryland 
would be not less than $2,083,917 in autual outlay in money, 
and really equal to not less than $2,625,400 in actual equiva- 
lent capital. When to this there was added the sum of 



46 The Economic History of the [320 

$2,358,420, the joint contributions of the state of Virginia and 
the city of Wheehng^ — all of which would have necessarily 
been relinquished had the stockholders voted to abandon 
the idea of constructing the railroad in Virginia — the differ- 
ence in favor of following the Virginia route amounted to 
$4,983,420 in actual and equivalent capital. With these sub- 
scriptions from Wheeling and Virginia just mentioned, the 
apparent resources of the company to complete the railroad 
to Pittsburgh and Wheeling were as follows: 

Subscription by state of Maryland $3,000,000 

Subscription by city of Baltimore 3,000,000 

Subscription by state of Virginia 302,100^ 

Additional subscription by state of Va. . 1,058,420* 
Subscription by the city of Wheeling. . . 1,000,000 



$8,360,520 



Estimated cost of completing the road. .$9,500,000 
Amount subscribed 8,360,520 



Amount still required $1,139,480 

The subscription of the city of Baltimore was limited by 
the terms of the ordinance authorizing it to the construction 
of the railroad between Harper's Ferry and Cumberland. 
It was payable in cash at the rate of not more than $1,000,000 
per year. To raise this sum the city commissioners of 
finance were authorized to issue city stock paying six per 
cent interest. But the condition of the money market in 
1838, 1839 ^^^ 1^40 was such as to render it impossible to 
put these stocks on the market at par. Therefore, instead 
of trying to float this large amount of city securities, the city 
commissioners of finance at first borrowed the money 
needed for the instalments called for by the railroad directly 
from the banks of Baltimore, and in order to meet the inter- 

^ Repealed by acts of Virginia Assembly, 1846, ch. 99, sec. 3. 



321] Baltimore and Ohio Railroad, 1827-1853. 47 

est on the loans the City Council levied a direct tax to cover 
the amount of interest for the first year. These loans were 
made by the banks upon deposits of city stock as security. 

Later on the stringency in the money market led to a 
very interesting but not altogether successful financial 
scheme. At a meeting of the directors of the company held 
in the autumn of 1839 i^ ^^s decided that something must 
be done to make the subscription of Baltimore immediately 
available at the par value of the six per cent city stock. 
Therefore it was determined to offer to contractors for their 
work and to the owners of land in payment for the right of 
way, certificates, payable when presented in sums of $100, in 
Baltimore City six per cent stock at par. That entire con- 
fidence might be felt in these certificates the requisite 
amount of city stock was to be received by the company 
simultaneously with each issue of certificates, and be imme- 
diately vested in two commissioners in trust for the holders 
of the certificates. These certificates did not promise to 
pay money, nor were they promissory at all in character. 
They conferred an absolute authority for the transfer of city 
stock when presented in the requisite amounts, and when 
this stock was received, the obligation for which the certifi- 
cates had been received in satisfaction was finally cancelled. 
They were therefore not paper money, although they might 
and did circulate as currency. 

The scheme was at first successful. The contractors and 
land-ov^ners to whom they were offered accepted them with- 
out demur. They in turn gave them to their workmen in 
return for labor. Here they were again accepted and so 
passed on into general circulation and floated the city stocks 
for a while at par. By September, 1840, the payments made 
through this medium amounted to $515,000. The number 
of certificates issued and their denominations were as fol- 
lows: 100 of $100 each, 6,800 of $5 each, 13,000 of $3 each, 
39,000 of $2 each and 354,000 of $1 each. By the autumn 
of 1840 only the 100 certificates for $100 each had been 
redeemed in city stock. The saving of interest to the city 



48 The Economic History of the [322 

due to the amount of the certificates kept in circulation was 
considerable. In addition to the amount paid by certificates, 
the payments by the direct delivery of the city stock 
amounted by September 30, 1840, to $138,87747. The cer- 
tificates, being fundable in city stock at par not worth that 
sum in the market, soon depreciated in value and much 
injury was done to the workmen holding these certificates, 
who were compelled to receive them at par in payment for 
their labor.^ A potent factor in depreciating these certifi- 
cates was a resolution passed by the City Council of Balti- 
more in 1842 (Resolution No. 52) repeahng the ordinances 
of February, 1841, allowing the certificates to be received 
in payment of taxes and city dues. 

By this means the extension of the railroad was con- 
tinued during a time when many other works of internal 
improvement throughout the country were partially or 
wholly suspended. The credit of the state also was pre- 
served from probable impairment, for the Virginia sub- 
scriptions, afterwards repealed, were not available, and be- 
fore the certificate scheme had been conceived the six per 
cent city stock had not been regarded as negotiable. There- 
fore the $3,000,000 subscription of the state of Maryland had 
been looked to as the means whereby the construction of the 
railroad was to be carried on. This subscription of $3,000,- 
000 by the state had originally been payable to the company 
in cash to be raised by the sale of state currency bonds bear- 
ing interest at six per cent. These bonds were to be offered 
for sale first in Europe before being put upon any other 
market. When the attempt was made to put these bonds 
upon the European market the state's commissioner in 
Europe reported that it was impracticable to do so, and 
wrote that sterling, instead of currency bonds, might prove 
more salable. The legislature of Maryland therefore changed 
the bonds to sterling bonds, bearing interest at five per 
cent and payable, principal and interest, in London. In 
order to provide for the interest for three years, an amount 



^ See contemporary Baltimore newspapers and broadsides. 



323] Baltimore and Ohio Railroad, 1827-1853. 49 

of bonds equal to $3,200,000 was issued and delivered 
directly to the railroad company in full payment of the state's 
subscription, the company giving the requisite guarantee for 
the payment of interest. 

Inquiries having revealed the fact that these bonds could 
not advantageously be disposed of either in New York or 
Philadelphia, President McLane went to London to en- 
deavor to place the bonds on the European market as profit- 
ably as possible. But by the time the bonds could be 
prepared and forwarded to London an unfavorable change 
had taken place in the European market so far as American 
securities were concerned. Such securities had accumu- 
lated in unprecedented quantities and a general depression 
in their value had taken place. Many causes had combined 
to weaken confidence in American credit, one of the most 
important, of course, being the repudiation of their debts 
by a number of American states and the suspension of inter- 
est payments upon their public debts by others — the state of 
Maryland being in the latter class. The knowledge that 
there would be forced sales of bonds like those of the state 
of Maryland at extremely low rates, rendered the sale of 
those belonging to the company absolutely impossible, 
except at rates ruinous to the interests of the company and 
extremely injurious to the credit of the state. For these 
reasons President McLane would not put the bonds upon 
the market. Instead, an arrangement was made with the 
house of Baring Brothers & Company of London by which 
that house agreed to advance such sums as loans to the 
company as it might require, for which the state bonds were 
deposited as security. The bonds were to be put upon the 
market, from time to time, in both Europe and America, in 
such amounts as the market might seem able to bear, upon 
terms favorable to the credit of the state and the interests 
of the railroad company. The necessity for such a loan 
was obviated, however, for the time by the issue of the 
stock-orders by the railroad, as already detailed. In Janu- 
ary and February, 1840, state of Maryland bonds were 
sold by Baring Bros. & Co. at 85, the proceeds netting 



50 The Economic History of the [324 

$21,583.68 in Baltimore. This amount was applied by the 
railroad company to the payment of interest which had 
accrued, July i, 1840, upon those bonds that had previously 
been sold in small lots. 

During the summer and fall of 1839 a corps of engineers 
was engaged in surveying and laying out the line of the rail- 
road from Harper's r, Ferry to Cumberland, so as to have it 
ready for the contractors to begin their operations in the 
spring of 1840. Another company of engineers began to 
survey a route for the railroad about the same time from 
Wheeling towards Cumberland, but the difficulties con- 
nected with making available the subscriptions to the rail- 
road caused the abandonment of this part of the enterprise 
for the time. Nevertheless, although it was necessary for 
the railroad company to spend money continually in making 
extensive repairs, as well as to purchase and put upon the 
road new locomotives and cars, and although there were 
great financial difficulties, the work of extending the rail- 
road from Harper's Ferry to Cumberland went steadily on 
after the spring of 1840. 

Dividends of 2 and 3^ per cent were declared in the fall 
of 1840 and 1 84 1 respectively, but no dividend was declared 
in the fall of 1842, owing to the fact that all available means 
were being employed in completing the railroad to Cumber- 
land, as well as because the city of Baltimore was unable to 
continue payments of instalments on its subscriptions. 
Over $2,465,000 had already been expended in continuing 
the railroad from Harper's Ferry, and this would practically 
have been lost had the railroad not been extended to Cum- 
berland, or at least to Hancock, some fifty miles below 
Cumberland. At this crisis, therefore, the whole revenue of 
the railroad was applied in aid of the city subscription, after 
having deducted from this revenue the amounts needed for 
operating expenses, repair of the old road, etc., etc. 

With the funds thus obtained the railroad was completed 
to a point opposite Hancock, 123 miles from Baltimore, on 
June I, 1842, and five months later it was opened to Cum- 
berland, 178 miles from Baltimore. 



325] Baltimore and Ohio Railroad, 1827-1853. 51 



CHAPTER IV. 

Embarrassment and Delay. 

(1842-1848.) 

It was not until the spring of 1849 that the actual exten- 
sion of the railroad west of Cumberland was begun. The 
obstacles and embarrassments that caused this delay were 
many. 

(i) By the laws of Maryland, Virginia and Pennsylvania, 
the railroad company had no authority without additional 
legislation to occupy any more territory for the construction 
of the road in any one of these states after 1843. 'Th^ addi- 
tional legislation desired was not obtained until after the 
expenditure of much time and trouble. 

(2) The company lacked the money necessary to finish 
the railroad as planned, nor was the credit of the company 
good enough to raise the large sums needed. 

(3) Such money as the railroad company did possess was 
urgently needed for the reconstruction of the road between 
Baltimore and Harper's Ferry and for new rolling stock. 

These three classes of difficulties which prevented the 
extension of the road will be considered more in detail. 

Delays in Legislation. 

The charters of the railroad as granted by the states of 
Maryland and Virginia in 1827 provided that the road must 
be finished within these states within ten years from the 
time of the commencement of the railroad, otherwise the 
charters would be null and void. A similar provision was 
inserted in the act passed by Pennsylvania in February, 1828, 
authorizing the construction of a railroad by the Baltimore 
and Ohio Railroad Company through that state, except that 
'* fifteen years " took the place of the words " ten years " in 



52 The Economic History of the [326 

the Maryland and Virginia acts. On March 28, 1836/ an 
act was passed in the Maryland General Assembly extend- 
ing the time for the completion of the railroad in Maryland 
to July 4, 1843. Such an act was necessary, for the road 
was then built only as far as a point opposite Harper's 
Ferry. 

Even at that time the legislature of Virginia was dilatory 
in its action as regarded the railroad, and although the right 
to build in Virginia expired July 4, 1838, and the company, 
anxious to push the construction of the road on towards 
Cumberland, was doing everything in its power to secure 
the passage of a favorable bill in the Virginia legislature, it 
was not until April 2, 1838, that a law was passed extending 
the time allowed " for the completion of that portion of their 
improvement to be constructed within this commonwealth " 
to July 4, 1843. The other provisions of this act, upon the 
acceptance of which depended the extension of time, have 
already been treated. 

But by November, 1842, the railroad had been constructed 
and opened only as far as Cumberland, a distance of but 
178 miles. There were still two hundred miles of railroad 
to be built in order to unite Baltimore with " the waters of 
the West." A few months more and the company would 
have no rights of further extension in Maryland, Virginia or 
Pennsylvania, and by the terms of the charters conferred by 
these respective states the charters themselves were null and 
void if the railroad had not been completed within these 
states within the time specified. 

For this last reason, even if it was impracticable to con- 
tinue immediately the construction westward, it was neces- 
sary to secure a further extension of time in Maryland and 
in Virginia or Pennsylvania. A grant of such extension 
was obtained without difficulty from the Maryland legisla- 
ture in 1843^ in an act of much importance, since it not 
only extended the time for the completion of the railroad 

' Acts of 1835, ch. 245. 2 Maryland Laws, 1842, ch. 301. 



327] Baltimore and Ohio Railroad, 1827-1853. 53 

in Maryland until July 5, 1863, but also provided for the sale 
of the state's interest in internal improvement companies and 
the payment of the state debts. But in spite of continued 
applications to the legislatures of Virginia and Pennsyl- 
vania, no acts at all acceptable to the company were forth- 
coming. 

The Virginia legislature passed various acts granting the 
desired extension of time, but these laws contained so many 
vexatious restrictions regarding rates, taxation, routes, etc., 
that they were all rejected by the Baltimore and Ohio stock- 
holders. 

Finally, after a long and tedious period of application and 
petitioning, the yirginia legislature granted an act authoriz- 
ing the extension of the railroad through Virginia on terms 
acceptable to the company. The act was passed March 6, 
1847,^ ^^d accepted at a general meeting of the stockhold- 
ers. This new law^ provided that the road was to be con- 
structed to Wheeling according to the plans and route sub- 
mitted by the chief engineer at a meeting of the stockholders 
held in Baltimore, July 12, 1845, with certain restrictions, 
however, that in order to secure to the city of Wheeling the 
benefit of the western terminus of the railroad, all parts 
thereof between the Monongahela river and Wheeling were 
to be opened for the transportation of passengers and freight 
simultaneously. The act also annulled the stock subscrip- 
tions on the part of the state of Virginia made by acts passed 
March 28^ 1837, and April 2, 1838, which had provided for 
subscriptions of $302,100 and of $1,058,420 respectively. 
Provisions were also inserted reserving the right to connect 
with or intersect the railroad by other lines of transporta- 
tion; obliging the company to erect certain depots, subject- 
ing the company to the general railroad law of Virginia f 
reserving the right of Virginia to tax the property, stock 
and profits of the company so far as these might be or 

' Acts of Virginia Legislature, session 1846, ch. 99. 
'Acts of Virginia Legislature, session 1837, ch. 118. 



54 The Economic History of the [328 

accrue in the commonwealth of Virginia on the same foot- 
ing with other similar companies within the state ; provided, 
however, that this taxing power was not to be exercised 
until and unless the net income of the railway company- 
was over six per cent per annum upon the capital invested. 
The city of Wheeling was authorized to subscribe $1,000,000 
to the capital stock of the railroad company upon such terms 
as might be agreed upon between the City Council of Wheel- 
ing and the company; and, again, that as a condition upon 
which the whole act was granted, the company was to 
" accept this act within six months and enter upon the con- 
struction of the continuation of their road hereinbefore 
authorized within three years, and complete the same within 
twelve years, after the passage of this act," i. e. by March 6, 

1859. 

So far as Maryland and Virginia were concerned, there 
were no further legal obstacles to the continuation of the 
railroad to the West. The charter had expired in Pennsyl- 
vania in 1843, ^^^ the act passed by the legislature of Penn- 
sylvania, June 20, 1839, extending the time for the comple- 
tion of the railroad in that state until February 27, 1847, was 
not accepted by the company, owing to the new and onerous 
conditions imposed by the act, especially those prescribing 
the route to be taken. 

Financial Difficulties. 

The years that were spent by the company in waiting for 
acceptable terms upon which to continue the extension of 
their railroad westward were not years wasted. At the time 
of the completion of the railroad to Cumberland the finances 
of the company were not in a condition to permit of new 
construction to any great extent or the expenditure of any 
large sums for such purposes. The money markets had not 
recovered in 1842 from the crisis and panic of 1837. As 
it was, the extension of the road to Cumberland from Harp- 
er's Ferry had only been made with much difficulty and 



329] Baltimore and Ohio Railroad, 1827-1853. 55 

skillful financiering. Although the railroad company had 
been able to realize from the $3,000,000 subscription of the 
city of Baltimore," yet the credit of the state of Maryland 
was so low that its bonds had been a failure on the London 
market, and but £5,250 worth had been sold at 85. This 
sum had not been used in construction at all, but to pay 
interest on existing debts. The revenues of the railroad 
company and a loan by Baring Bros., with the state bonds 
as security, had together realized barely enough to enable 
the completion of the railroad to Cumberland. 

The period between November, 1842, and the spring of 
1849 — when the active construction of the road toward 
Wheeling was finally begun — was spent in reconstructing 
those portions of the road east of Cumberland which were 
in need of improvement, in providing adequate rolling stock 
and preparing to make the financial arrangements requisite 
to ensure the completion of the road as soon as the neces- 
sary legislation regarding the right of way had been secured. 
It was evident to the directors at this time that the money 
necessary to completion could not be then obtained. The 
greater portion of the state bonds in payment of the $3,000,- 
000 subscription still remained in the hands of the company, 
and indeed bade fair to so remain for an indefinite period. 

In 1844 President McLane went to Europe for the second 
time in the interests of his company, to try to secure financial 
aid in the London market. He returned in October, 1846, 
without having accomplished his object, but his examina- 
tion of the workings of the English railroads resulted in his 
submitting to the board of directors an improved method of 
organizing the operations of the road. The plan was 
adopted in 1847 ^.nd, with but a temporary suspension 
during the administration of President Swann (1848-1853), 
remained the permanent organization of the road for many 
years.^ 

^ Session of 1836, Resolution No. 40. Approved March 17, 1836. 
- The principal objects of the reform were to insure a proper 
adaptation and application of the supervisory power in each depart- 



56 The Economic History of the [330 

Almost immediately after the opening of the road to 
Cumberland it became necessary to reduce rates, owing to 
the fact that the Pennsylvania lines had met the prospective 
competition of the Baltimore and Ohio by lowering their 
rates considerably below those of their Maryland rival. 
Consequently charges for passengers on the Baltimore and 
Ohio were reduced about 25 per cent, and for freight about 
30 per cent below the rates of the previous year. President 
McLane in his report^ naively remarks that the Pennsyl- 
vania lines have established " rates which it is believed are 
not required by the public nor justified by the true interests 
of the works." Another disappointment to those interested 
in the Baltimore and Ohio was the fact that the wagon trans- 

ment to the object under its immediate charge by means of a judici- 
ous division of labor; to effect a strict responsibility in the collection 
and disbursements of money, and in the accounting department 
generally by the multiplication of checks; to confine the company's 
mechanical operations in the shops to the purposes of repairs rather 
than of construction; and to promote the economical purchase and 
application of materials and the objects needed in every class of 
service. It was believed that all these ends could be best reached 
by confiding the departments of transportation, of the reconstruc- 
tion and repairs of the road and of the repairs of machinery to 
separate superintendents of " Transportation," of " Road " and of 
" Machinery " respectively. Each of these departments was to be 
subject to the immediate supervision of a professional engineer 
under the general direction of the president of the road. All of 
these officers and all of the principal agents of the road were to be 
subject to annual appointment, and satisfactory security was to be 
required from each for faithful performance of duty. 

Measures were also taken that the receipt of money be confined 
to as few agents as possible; for prompt payment from all of 
moneys received by them; for a new and securely guarded system 
of tickets to supersede the old, loose method by which counter- 
feiting was invited; for the imposition of further checks upon con- 
ductors and other agents, which were thought would prove more 
effective in enforcing a rigid accountability from all. A daily 
account was required of all agents with the secretary and treasurer 
of the railroad under the immediate supervision of the president in 
the central office of the company. It was evident too that the ex- 
pense of the new system would be less, and that the efficiency 
would be much greater, than under the older and laxer system of 
general superintendents. 

^ Seventeenth Annual Report, p. 4. 



331] Baltimore and Ohio Railroad, 1827-1853. 57 

portation over the National Road from the West failed to 
supply the anticipated traffic at Cumberland. This draw- 
back was not fully obviated until the extension of the road 
to Wheeling in 1853. Still the completion of the railroad 
to such an important point as Cumberland showed imme- 
diate results in the augmentation of traffic, bearing out the 
claims of the presidents and directors that the more nearly 
the road was completed the larger, proportionally, would 
the net receipts become. Thus, for example, the receipts 
from passengers, mails and freight, the expenses for the 
same, and the net receipts for the four years 1841-44 — the 
two years before and the two years after the road was fin- 
ished to Cumberland — were as follows: 





Receipts. 




Expenses. 




Fears. 


Passengers 


Freight. 


Total 




Net 




and Mails. 




Receipts. 




Receipts. 


1841 


$179,616 


$211,454 


$391,070 


$239,622 


$151,448 


18,1? 


181,177 


245,315 


426,492 


216,715 


209,777 


1843 


274,617 


300,618 


575,235 


295,833 


279,402 


1844 


336,876 


321,743 


658,619 


311,633 


346,986 



The receipts from freight increased very rapidly after 
1845. 

Some such statement of the principles governing the earn- 
ings of but partially completed railroads was necessary to 
satisfy the demands of individuals who had their capital in- 
vested in Baltimore and Ohio stock, and who had seen very 
little return therefor, as well as to keep all alive to the abso- 
lute necessity of completion of the road to Wheeling, in 
order to realize the long hoped-for benefits that were ex- 
pected to accrue from the great railroad. Although it was 
only too evident that the railway tracks and roadway gen- 
erally east of Harper's Ferry were in, need of thorough 
repairs, and in places even of reconstruction, and that money 
was needed for new rolling stock to satisfy the demands 
made for the transportation of goods from the region around 
and to the west of Cumberland, yet it was deemed expedi- 
ent in the fall of 1843 ^^ declare a dividend of 2 per cent 



58 The Economic History of the [332 

upon the stock of the main Hne of the railroad. The divi- 
dend amounted to $140,000, or 2 per cent on $7,000,000. 
This amount of capital, however, was not all that upon which 
the dividend ought to have been declared, for surplus net 
revenue had been reinvested, i. e. used as capital, from 1830 
onward, and by the fall of 1843 this sum amounted to $873,- 
806. 

In the president's report^ in which the above facts were 
announced, and indeed in all the reports from this time on 
and up to 1852, stress is laid upon the necessity of the com- 
pletion of the work as orginially contemplated, the point 
being made that not only would the capital invested in an 
uncompleted line of railroad pay no dividends, but that the 
commerce and prosperity of Baltimore would be irretriev- 
ably injured by lack of communication with the West. 

Need of Reconstruction and New Equipment. 

The history of the railroad during this period is a story — 
so far as the practical workings and internal policy are con- 
cerned — of a struggle to survive and to remedy the serious 
mistakes made in the earlier years of the company's exist- 
ence. The errors which cost the company so dear in the 
forties were mainly mistaken economies in construction and 
inadequate calculations as to the cost of a great and perma- 
nent railroad through an unfavorable territory. Ignorance 
in regard to railroad construction was at that time practic- 
ally universal in America, and there was no school save that 
of experience in which the directors of the early railways 
could learn. In so far the early errors of the Baltimore and 
Ohio Railroad Company were unavoidable, but the experi- 
ence was dearly bought. 

Early in 1846 it became absolutely necessary to recon- " 
struct entirely the line of road from Baltimore to Harper's 
Ferry, a distance of 81 miles, for the road as originally 
built was entirely inadequate for the heavy traffic for which 

' Seventeenth Annual Report (1843). 



333] Baltimore and Ohio Railroad, 1827-1853. 59 

it was being used. It was necessary, too, that the new 
" edge " rail be laid in place of the already antiquated 
" plate '' rail. In January, 1846, the board of directors pro- 
vided that thirty miles of road be immediately equipped with 
the new rails. The cost of this reconstruction was esti- 
mated at $316,800. The company had not the necessary 
funds at hand to pay for this except by taking the revenues 
of the road. It was possible to sell mortgage bonds on 
the open market only at a discount of at least ten per cent. 
Reasons for this were the low credit of the company, owing 
to its small dividends (never yet above 3 per cent), the 
absence of limit to the amount of bonds the company might 
issue and of proper provision for repayment. It was there- 
fore resolved by the directors that the interests of the com- 
pany and of the stockholders could be best served by apply- 
ing net revenue to the amount of $1,000,000 to the further 
reconstruction of the railroad, and by issuing dividends to 
the stockholders up to the same amount, partly in the com- 
pany's 6 per cent (second mortgage) bonds at par and partly 
in cash. The 3 per cent dividend declared September 30, 
1846, was provided for as follows: "To all stockholders 
owning on the first day of October, 1846, less than 50 shares 
of stock, three dollars in money on each share on and after 
November 20, 1846; and to all similar stockholders owning 
50 shares and over, one dollar on each share in money and 
two dollars in the bonds of the company, bearing 6 per cent 
interest, payable quarterly and reimbursable in twenty 
years.'' It was hoped that by these means the value of the 
company's bonds would be raised. 

It was announced in the report of the president of the 
road for 1846 that owing to the state of the road necessitat- 
ing not only reconstruction, but also a large future outlay 
on engines and cars (needed not only to replace those worn 
out, but also to purchase additional ones to accommodate 
the increasing traffic), no dividends were to be expected at 
the end of 1847, and that for the same reason " the dividend 
for the year ending September 30, 1848, will also be materi- 



60 The Economic History of the [334 

ally diminished." No further cash dividend was declared 
until May, 1856 — a dividend of 3 per cent in bonds of the 
company being declared in 1847, ^^^ yearly dividends in 
additional stock of the company, i. e. " scrip," from 1848 to 
1853 inclusive. 

The work of reconstruction of the road was continued 
through 1847. Nearly $50,000 of the company's 6 per cent 
second mortgage bonds had been sold at about par, and the 
city of Baltimore had agreed to take $105,000 of the same 
securities at par as dividend. As regarded payments for 
the thirty miles of reconstruction authorized the previous 
year, the company had arranged to make part payment in the 
company's notes at long credit and part in the above-men- 
tioned 6 per cent bonds at par. Furthermore, contracts had 
been made to the amount of $152,872 for alterations and 
improvements in the old track, and these contracts were to 
be payable also in the 6 per cent bonds at par. And finally, 
yet more of these 6 per cent bonds were used at par to pay 
the dividend of 3 per cent which was declared September 30, 

1847. 

The year 1848 was well spent in perfecting the workings 
of the railroad, in fostering economies by improvements in 
organization, construction and equipment, and in general 
preparation for the early extension of the road westward 
by careful reconnoissances and surveys of the region between 
Cumberland and Wheeling over the routes already fairly 
well known to the engineers. The next year witnessed the 
beginning of a period of renewed life, which did not end 
until the railroad had reached its western terminus at Wheel- 
ing. 

When, in 1848, the company initiated its system of apply- 
ing net revenue as capital in reconstructing and improve- 
ment and issuing stock dividends in lieu of money, it used 
part of this new capital in the purchase of ten first-class 
engines, two second-class engines, a third-class engine, 28 
passenger cars and 171 freight cars. A branch of the rail- 
road was extended to the south side of the harbor in Balti- 



335] Baltimore and Ohio Railroad, 1827-1853. 61 

more, where grounds were purchased at Locust Point. 
This was done so that freight not intended for distribution 
in the city might be carried by steam to the water's edge, and 
the expense and inconvenience of using horse-power through 
the streets of Baltimore avoided. Some $200,000 were also 
spent in general repairs of the road east of Harper's Ferry, 
and in straightening and changing the defective location of 
the track east of the Monocacy river, so that there might 
be no cun/e of less than 600 feet radius. 



62 The Economic History of the [336 



CHAPTER V. 

Completion. Cumberland to Wheeling. 

(1848-1853.) 

The administration of Thomas Swann, third president of 
the Baltimore and Ohio Railroad Company, covers the com- 
pletion of the main stem, at that time the longest railroad 
in America. The construction in four years (1849-1852) of 
two hundred miles of railroad through the mountainous 
region of the Alleghanies, over ravines and rivers, through 
tunnels drilled in the rocky mountain-side, up steep ascents 
and around perilous curves, and above all, in face of a lack 
of the funds necessary to carry out fully the matured plans 
of the project, was an achievement only to be accompHshed 
by a man of indefatigable energy, courage and indomitable 
will — a man at once a financier, an administrator and one 
possessing rare executive ability. 

When Thomas Swann was elected president of the com- 
pany shortly after McLane's resignation in 1848, his views 
on the expediency and necessity of speedy completion of 
the railroad to Wheeling were well known. He had already 
served the company as director and member of special com- 
mittees appointed to secure favorable legislation for the rail- 
road from the General Assembly of Virginia. 

At a meeting of the board of directors held early in 1849, 
President Swann emphasized the fact that the friends of the 
railroad were becoming disheartened and many of the stock- 
holders and the public generally were growing suspicious 
and unfriendly to the project, owing to the delays in its com- 
pletion and inadequate returns upon their investments. The 
subscriptions of the state and city had caused an increase in 
taxation without any corresponding compensation. To put 
the railroad upon a paying basis, to ensure to Baltimore the 



337] Baltimore and Ohio Railroad, 1827-1853. 63 

commerce to which by virtue of geographical situation and 
natural advantages she was entitled, and finally to revive 
some of the old enthusiasm in the friends of the company, 
President Swann urged that active measures be at once taken 
to complete the railroad not only to Fairmont on the Monon- 
gahela river (as proposed by some of the directors), but to 
Wheeling on the Ohio river, as had been the original in- 
tention of the organizers of the company. President Swann 
did not OA^erlook the difficulties, financial and topographical, 
which opposed the successful completion of this plan, but 
showed that the sacrifices already made in building the line 
of road then finished were much greater than those still to 
be made. His address is said to have had such an efifect 
upon his hearers that George Brown, one of the directors 
and with Philip E. Thomas, co-founder of the company, is 
reported to have risen in excitement and moved " that the 
chief engineer be directed to arrange to put the whole line 
to the Ohio river under contract as speedily as practicable." 
The resolution was adopted with enthusiastic unanimity. 

Reconnoissance of the country lying between Cumber- 
land and Wheeling had been made as early as 1836 under 
direction of Benjamin H. Latrobe, and in his report he esti- 
mated the cost of building a railroad from Harper's Ferry 
to Wheeling, through Pittsburgh, at $9,500,000. In 1843 
preliminary reconnoissances v/ere made in the state of Vir- 
ginia of the region lying between Cumberland and Wheel- 
ing. In July, 1847, Latrobe directed the operations of three 
corps' of engineers engaged in the location of the proposed 
line of railway from Cumberland westward to the Maryland- 
Virginia boundary fine. The party of engineers having the 
westernmost section in hand — but fifteen miles — on the com- 
pletion thereof passed into Virginia, and by the close of the 
season some sixty miles of the route westward from Cumber- 
land were ready for contract. In the summer and fall of 
1848, Engineer Latrobe, induced by the difficulties of a suit- 
able route over the mountains and across the valleys of the 
Cheat River and Tygart's Valley River regions, secured the 



64 The EcofKymic History of the [338 

services of two other expert engineers, who examined the 
entire region with care. The three engineers finally decided 
upon the routes that it would be best to follow, and reported 
also that in their opinion the construction of a railroad across 
this mountainous country was quite practicable with grades 
within the power of the locomotive. 

All conditions at this time would have been favorable for 
the active extension of the road westward but for the lack 
of money. According to the estimate submitted by the 
general superintendent in October, 1849, the cost of the road 
from Cumberland to Wheeling was estimated at $6,278,000. 

President Swann in his report for 1850 made the following 
exhibit of how much of this amount was to be raised, and 
how much of it the company then had or had already 
expended : 

(i) Money expended for all purposes in the extension 
of the road west of Cumberland (Sept. 30, 1850), 
exclusive of bonds given for iron rails and inter- 
est $ 934.713-56 

(2) Balance of cash from sale of £200,000 5 per cent 

bonds 476,650.00 

(3) Value of 5 per cent sterling bonds unsold (£50?,- 

500) 2,172,908.06^ 

(4) Bonds issued for iron rails (Jan. i, 1850) at 6 per 

cent, for £127,500 secured by mortgage. Baring 

Brothers 566,666.67 

(5) Revenue during progress of work, estimated at... 500,000.00 

(6) Subscription of city of Wheeling 500,000.00 

$5,150,938.29 

(7) Deficiency to be made up to enable the whole road 

to be placed under contract. Proposed to be 
raised by 6 per cent coupon bonds of the com- 
pany 1,128,73100 

$6,279,669.29 
Estimated cost of the road (Cumberland to Wheeling) 

as per report of the general superintendent, Oct. 

29, 1849 $6,278,000.00 

[Actual cost $6,631,721.00] 

^ The actual yield of these bonds was only $1,973,688.89, on account 
of their having been sold at a limit of 91 on January 3, 1851. Cf. 
Report of President for 1851. p. 8. 



339] Baltimore and Ohio Railroad, 1827-1853. 65 

Taking into account the previous financial history of the 
railroad, the statement made a fairly satisfactory showing. 
Still it was not at all certain that the arrangements there 
shown could be actually carried out. Two of the items had 
already been financiered through by President Swann. The 
first deal was in regard to the Maryland state bonds issued 
in payment of the state's $3,000,000 subscription to the Bal- 
timore and Ohio, and up to this time practically unsalable. 
These bonds were lying intact — ^with the exception of £5,000 
sold in small lots — in the vaults of Baring Bros, of London 
as security for advances that that firm had made to the 
railroad company, and as a matter of policy, in that the oppor- 
tunity for selling them would be better in London hands 
than in American. President Swann turned to these bonds 
as a means of raising revenue. They could be sold only if 
the credit of the state and of the railroad company^ were 
raised by the active support of some such powerful London 
banking house as Baring Brothers. This support was 
secured after a long correspondence, and the London firm 
bought £200,000 of the 5 per cent sterling bonds of the state 
at a rate equal to that prevailing in the home market for the 
limited amount of these bonds offered for sale. It was 
hoped that the effect of this sale would be twofold — a reduc- 
tion in the estimates of the probable cost of the road, owing 
to the confidence inspired by a full treasury; and a higher 
market rate for the remaining sterling bonds, due to the 
purchase made by such a conservative and powerful finan- 
cial house as Baring Brothers. Both results did follow for 
a time, but other difficulties soon more than offset the 
advantages thus derived.^ 

^ Shares of Baltimore and Ohio stock were sold in Baltimore in 
October, 1848, at 28. 

^ These bonds had been sold in limited amounts below par, but in 
his report for 1850 (p. 15) President Swann says that these bonds 
with the endorsement of Baring Bros, had sold in the London 
market during 1850 at from 105 to 108. The absolute necessity for 
money to finish the road led to a forced sale of the remaining bonds 
to a New York firm in January, 1851, at 91, realizing $1,973,688.89. 



66 The Economic History of the [340 

The second deal had for its object the raising of $566,- 
666.67 ^or the purchase of iron rails, and was also consum- 
mated through Baring Brothers. The railroad company 
issued £127,500 of 6 per cent mortgage bonds to Baring 
Brothers, payable in equal instalments in January, 1856, 
1857, 1858, 1859 and i860, and received in return some 
20,000 tons of iron rails from Thompson & Foreman of 
London. These bonds were known as the " Iron Bonds." 

The deficiency of $1,128,731, the sum needed to construct 
the railroad according to the estimate of October, 1849, was 
made up by the issuance to President Swann of 6 per cent 
mortgage bonds to the amount needed. The bonds were 
dated July 10, 1850, and were payable July i, 1875. It was 
deemed inadvisable to put these bonds immediately upon 
the market, and they were not sold until 1852, when an 
unexpected crisis confronted the directors. The expenses 
of construction were then very large, the monthly average 
during the previous fiscal year having been $200,000. Five 
thousand laborers and over a thousand horses were then 
being employed by the company in the construction of new 
road. The treasury was growing alarmingly weak and it 
was found that the coupon bonds could not be floated at 
anything like par. The railroad must be completed at the 
earliest possible moment. Repeated efforts were therefore 
made to sell the bonds at a figure favorable to both the 
credit and the interests of the company, but were for a long 
time fruitless. The bonds were finally sold at a limit of 80, 
the directors feeling that it was better to make this com- 
paratively small sacrifice for the time being rather than to 
endanger the existence of large and varied interests by in- 
definite delay in the completion of the work. 

Legislation regarding the railroad during the period from 
1849 to 1853 was comparatively unimportant, except for an 
act passed March 21, 1850, by the legislature of Virginia. 
The reasons for the passage of this act were as follows: By 
the law passed by the Virginia legislature, March 6, 1847 
(Ch. 99, Acts of 1846-7), it had been provided that extension 



341] Baltimore and Ohio Railroad, 1827-1853. 67 

of time for completion through Virginia depended among 
other things upon the railroad being made to enter the 
ravine of the Ohio river not south of the mouth of Fish 
Creek in Marshall County, with the further provision " that 
if the said railroad by the cheapest route to the city of 
Wheeling, which shall not enter the ravine of the Ohio river 
at any point south of Grave Creek in Marshall County, shall 
appear from the estimates to be made as aforesaid to be 
more costly to construct, maintain and work than it would 
be by the route passing into the ravine of the Ohio river at 
or near the mouth of Fish Creek and thence to the city of 
Wheeling; and if, when the difference of probable cost be- 
tween said two routes shall be ascertained as aforesaid, the 
city of Wheeling shall agree to pay to said railroad such 
difference of cost by the time said railroad shall be com- 
pleted and opened for transportation to said depot in 
Wheeling (which payment it shall be lawful for the said city 
of Wheeling to provide for and make), then the said railroad 
company are hereby required to locate and construct their 
said railroad so that in passing to said depot in Wheeling 
it shall not enter the ravine of the Ohio river at any point 
south of Grave Creek." 

Since the time of the completion of the Baltimore and 
Ohio to Cumberland it had been the desire of the company 
to build its road in as straight and southerly a line to the 
Ohio as possible, in order to connect with Cincinnati and 
St. Louis over the shortest line of road, and it was not at 
all desirous of making Wheeling the terminus of the main 
stem. The people of Wheeling, on the other hand, fearing 
with much reason that the more southerly the line of the 
Baltimore and Ohio the greater danger of their commerce 
and industry being unfavorably affected, owing to the short 
and direct connection of Baltimore and the Atlantic sea- 
board with Cincinnati and St. Louis, had made every effort 
to make the railroad take the most northerly route to their 
city. The citizens of Wheeling therefore decided upon the 
Grave Creek or more northerly route; the directors of the 



68 The Economic History of the [342 

Baltimore and Ohio, looking to what they considered their 
own best interests, decided upon the Fish Creek route. As 
a matter of course, controversy and dissension followed. As 
a consequence, the citizens of Wheeling proposed to make 
an application to the Virginia legislature to stop the progress 
of the railroad in that state. President Swann went to the 
legislature and succeeded in counteracting this application, 
but a law was passed, March 21, 1850, providing for a board 
of three engineers, " not residents of the states of Maryland, 
Virginia, Pennsylvania or Ohio, and not interested in or 
in any manner connected with the said company or the said 
city," which board was to render a final and binding decision 
after full investigation of the matter in dispute. From a 
desire to avoid further delay in the completion of the road, 
since the above-mentioned board of engineers had made a 
decision^ adverse to the company, President Swann advised 
the Baltimore and Ohio stockholders, at a general meeting 
held in May, 1850, to give way to the desires of the people 
of Wheeling and build along the Grave Creek route. This 
was accordingly done, and what had bidden fair to be a long 
and stubbornly contested controversy was thus averted by 
the conciliatory policy of the railroad. 

The city of Wheeling, by the agreement of 1847 with the 
railroad company, had stipulated to furnish free of charge, 
with the right of way through the city streets, a depot on the 
north side of Wheeling Creek with not less than two acres 
of ground. By a compromise between the city and the com- 
pany the agreement of 1847 was abrogated and another 
made, whereby Wheeling agreed to pay $50,000 of the 
$78,000 estimated as the cost of the Wheeling depot. The 
railroad company agreed to do this because the latter sum 
included in its purchasing power a considerable plot of 
ground that would not be needed by the railroad and that, 
it was believed, could be sold for more than the $28,000 
difference. 

' Cf. Report, 1850, p. 13. 



343] Baltimore and Ohio Railroad, 1827-1853. 69 

It was felt that for the next few years the railway would 
have to depend upon the navigation of the Ohio river to 
a considerable extent as regarded communication with Cin- 
cinnati, St. Louis and other points beyond the western ter- 
minus of the road. But a passenger ascending the Ohio 
river in a steamboat could reach Baltimore in about the 
same time it would take him to reach Pittsburgh, since 
Wheeling was a day's journey by boat from Pittsburgh. 
The importance of a line of boats connecting with the Balti- 
more and Ohio schedule was clearly seen, and a company 
was organized in 1852 under a charter passed by the Vir- 
ginia legislature, whereby a daily line of boats " of a class 
superior to any yet floated upon the Western waters," was 
to be ready to run on the Ohio by January i, 1853, in con- 
nection with the Baltimore and Ohio to Cincinnati and 
Louisville. 

With aflfairs in such a condition as regarded the future, 
although the company had a large bonded debt and the 
need of a second track and an ampler equipment soon be- 
came evident, it was no wonder that the spirits of those who 
had worked hard in bringing the enterprise to a successful 
completion were elevated and that they looked with confi- 
dence and assurance to the years to come. 

While the new road from Cumberland to Wheeling was 
in process of construction it was the policy of the company 
to keep the line east of Cumberland in the very best possible 
condition, having by this time learned that the most expen- 
sively built railroad is really the cheapest, and that imme- 
diate and careful attention to minor repairs effects great 
economies. Simple and evident as this appears, it had by 
no means always been acted upon. Preparations were also 
being made to increase the capacity of the road from its 
limited power in 1848, so as better to meet the traffic which 
it was confidently felt the completion of the main stem 
would develop. The means by which this was done were 
by issuing dividends in the form of additional stock and 
using the net receipts, which the stock dividends represented, 



70 The Economie History of the [344 

as additional capital applied to construction. The following 
" scrip " or stock dividends were thus declared: 3^ per cent, 
payable in November, 1848; 5 per cent, payable in Novem- 
ber, 1849; 7 P^r cent, payable in November, 1850; 7 per cent, 
payable in November, 185 1; 7 per cent, payable in Novem- 
ber, 1852; and 3 per cent, payable in May, 1853. 

During this period of completion of the railroad to Wheel- 
ing the company made many other provisions for perfecting 
their road. New engines and cars were ordered, so that in 
January, 1853, the company had 139 engines, 96 passenger 
cars and 2567 freight cars. In 1852 the ground was bought 
upon which Camden Station, the present principal depot of 
the Baltimore and Ohio in Baltimore, now stands, and prepa- 
rations were made to erect a suitable building and train-shed. 
Permission was given to the company by the city to 
approach the new depot by steam locomotive, thereby obvi- 
ating the expense of horse-power. The Mt. Clare shops, at 
which 1,000 men were employed during 1852, had also been 
much enlarged during this period, and many improvements 
had been made upon the company's property at Cumberland 
and Martinsburg. The facilities afforded by the railroad 
for the cheap transportation of coal to tide-water had led to 
the opening and development of many mines in and around 
the Cumberland and Frostburg regions. The large increase 
in the coal trade led to the need of enlarged facilities for 
handling coal at Baltimore, and new wharves, fitted com- 
pletely for transferring thousands of tons of coal to waiting 
vessels, were erected at Locust Point, not only by the rail- 
road company, but also on private account. 

The building of the new road westward proceeded rapidly 
and uninterruptedly in spite of financial and topographical 
obstacles. In the twenty-third annual report of the Balti- 
more and Ohio in October, 1849, President Swann was able 
to announce that 103^ miles had been put under contract, 
and those at very advantageous prices. During the next 
official year ending September 30, 1850, the work was 
pressed on. The action of the board of engineers appointed 



345] Baltimore and Ohio Railroad^ 1827-1853. 71 

under the act of March 21, 1850, by the legislature of Vir- 
ginia had led the stockholders and directors of the company 
to decide to use the Grave Creek route, and work was 
accordingly being done upon it. In spite of the fact that 
there had been a scarcity of labor during the previous year, 
167 miles of road were announced as under way. Some 
3,500 laborers and 700 horses were engaged on this work 
during 1850. The rails were laid during the spring of 1851, 
and in July of that year the road was formally opened to 
Piedmont, twenty-eighf miles west of Cumberland. 

Not quite a year after the opening to Piedmont (June 22, 
1852) the road was opened to Fairmont on the Mononga- 
hela river, 124 miles from Cumberland and but yy miles 
from Wheeling. The location of this road through one of 
the boldest mountain regions which had yet been traversed 
by any work of internal improvement in America is said to 
have excited surprise even among professional engineers. 
For more than seventy miles the road had been built across 
a succession of mountain ranges. The Monongahela river 
was crossed by a viaduct 650 feet long and 39 feet above 
low water, the iron superstructure supported by the massive 
abutments forming what was then the largest iron bridge 
in America. Between Cumberland and Wheeling eleven 
tunnels were bored, making together a total of 11,156 feet 
in length. The three largest were 4,100 feet, 2,350 feet and 
1,250 feet in length respectively. Between the same points 
there were 113 bridges with a total length of 7,003 feet and 
ranging from 12 to 205 feet span. 

On Christmas Eve, 1852, the last rail was laid and the last 
spike driven. Baltimore had finally been connected with 
the " western waters " by bonds of iron. President Swann's 
hopes and predictions, in the face of innumerable and appar- 
ently insurmountable obstacles, were fulfilled. On the first 
of January-, 1853, the first train to make the complete trip 
from Baltimore to Wheeling rolled through the streets of 
that city bearing the first of the five hundred guests who 
came to participate in the formal celebration of the com- 
pletion of the Baltimore and Ohio Railroad. 



72 The Economic History of the [346 



CHAPTER VI. 
General Results. 

During the period of construction of the Baltimore and 
Ohio Railroad from Baltimore to Wheeling the enterprise 
exercised important influences upon the growth of the 
wealth and the development of the resources of Maryland. 
It is not easy to put into figures or to estimate the exact 
contribution of the railroad to the economic interests of the 
country along its route. But in a general way these effects 
can be indicated by statements regarding the part played 
by the railroad in the development of the towns and of the 
mineral, agricultural and other resources of the state. The 
development of the natural wealth of Maryland led to an 
increase in trade and commerce as well as in manufactures. 
This in turn exerted important influence upon the growth of 
the towns and, more especially, of Baltimore. 

Had the Baltimore and Ohio Railroad not been built at 
the time and by the means actually employed, some other 
line of railroad would undoubtedly have been constructed 
sooner or later, connecting Baltimore with the West. Such 
a railroad if built at a later date might have been constructed 
at a smaller apparent cost, but it is doubtful if the real cost 
would have been less. For in 1827 a railroad to the West 
was a necessity brooking no delay, and although the Balti- 
more and Ohio up to the completion to Wheeling paid no 
adequate dividends to its stockholders, yet it paid largely 
to the people of Maryland in a positive way by developing 
their resources, and in a negative way by preventing the loss 
of the internal trade of Maryland and of the West. 

Effects upon the Industries of Maryland. 

The efifect of the railroad in stimulating the industries of 
Maryland is perhaps nowhere better shown than in the 
development of coal mines, iron mines and quarries. 



347] Baltimore and Ohio Railroad^ 1827-1853. 73 

Before the railroad reached Cumberland in November, 
1842, the rich coal deposits of Western Maryland had been 
practically unworked. The residents of Frostburg, then a 
straggling hamlet, and some of the residents of Cumberland 
had been in the habit of digging a few hundreds of bushels 
out of the surface veins during the winter. This coal was 
loaded on fiat-boats and floated down to Alexandria by 
means of the spring floods which deepened the Potomac. 
Here boats and cargo were sold and the crews generally 
walked back to Cumberland. 

With the extension of the railroad to Cumberland real 
work in the mines began. Several contracts were made 
between the railroad and mining companies for the trans- 
portation of coal and iron to the eastern market, and the 
railroad company commenced to provide better facilities 
in the way of cars, side-tracks and switches for the rapid 
carriage of mineral freights. Large coal wharves were built 
by the railroad company at Locust Point in Baltimore to 
provide easy means of transhipment of coal from the cars 
to the holds of vessels, and the building of similar private 
wharves was encouraged by the ofifer of a lower rate for the 
transportation of coal. By 1850 the rich coal region around 
Cumberland and Frostburg had already been much devel- 
oped, and the demand for this coal was increasing more 
rapidly than the facilities needed to bring it to market. In 
1 85 1 several companies owning lands in the coal basin about 
Westernport began to open mines along the line of road 
west of Cumberland. The traffic received a temporary 
check in the winter of 1852, owing to the failure of the 
Maryland Mining Company in October, 1851, and the 
heavy rates of pilotage of vessels entering and leaving the 
harbor of Baltimore during the opening months of 1852, 
but the business soon began to increase beyond its former 
volume, and by the fall of 1852 the company had applica- 
tions for coal contracts aggregating several thousand tons 
per day. Much coal freight was also expected from the 
piercing of a vast coal basin by the George's Creek Railway, 



74 The Economic History of the [348 

under construction in 1852 and planned to connect with the 
Baltimore and Ohio at Piedmont. Before 1843 there is no 
mention of the transportation of any coal whatever over the 
Baltimore and Ohio. During that year but 4,964 tons were 
transported. In 1850 the shipments of coal eastward over 
the Baltimore and Ohio aggregated 132,534 tons; in 1851, 
139,110 tons, and in 1852, in spite of many obstacles to the 
traffic, 132,306 tons. 

The iron deposits of the state, although worked earlier, 
were not developed to such an extent as the coal mines. 
1,574 tons of iron were shipped to the east in 1832; five years 
later the year's shipment amounted to 4,883 tons. The 
amount of iron began to decrease after this until the road 
reached Cumberland, when the working of the iron deposits 
in Alleghany county led to largely increased shipments, not 
only of iron, but also of iron ore. In 1851, 10,956 tons of 
iron and 4,386 tons of iron ore were shipped to the east. 

The extension of the Baltimore and Ohio likewise greatly 
encouraged the opening of quarries. The shipment of 
granite, lime, soapstone and limestone to the east amounted 
in some years to over 10,000 tons, whereas the high cost of 
transportation had heretofore made the working of quarries, 
except in the immediate vicinities of the large towns, un- 
profitable. Fire-brick was shipped during and after 1849 
at the rate of hundreds of tons per year. 

Flour and tobacco were the principal agricultural pro- 
ducts of Maryland during this period, and the extension of 
the railroad westward is marked by an increasing shipment 
of these commodities to the eastern market. Before 
the construction of the railroad these products had been 
brought by wagons to Baltimore, but at considerable ex- 
pense and with many delays incident to unfavorable weather. 
Ellicott's Mills was a center of the flouring industry, and 
the construction of the railroad to this particular place was 
caused by the need of adequate facilities for the transporta- 
tion of flour from the mills to tide-water in Baltimore. 

In the year ending September 30, 1832, some 12,610 tons 



349] Baltimore and Ohio Railroad, 1827-1853. 75 

of flour (146,936 barrels) were carried by the railroad from 
Ellicott's Mills and Frederick to Baltimore. In 1842 twice 
as many tons (25,233) were shipped eastwardly through the 
state via the Baltimore and Ohio, and in 1852 no less than 
66,377 tons were so shipped. The encouragement given to 
agriculture is also shown by the fact that but 353 tons of 
grain were shipped eastward in 1832, while in 1852 nearly 
5000 tons were so shipped. 

The shipments of tobacco increased from 174 tons in 1832 
to 1,510 tons in 1843, ^^^ ^o 2,322 tons in 1848, but dimin- 
ished in size in the next few years. Shipments of meal in- 
creased from 512 tons in 1832 to 3,174 tons in 1852. 

Maryland was not noteworthy as a cattle-raising state, and 
the live stock needed in Baltimore for local consumption 
was driven to town from the nearby regions along the high- 
ways. But with the westward extension of the railroad a 
slowly increasing demand arose for cattle from the interior. 
There is no record at all of live-stock shipped eastward in 
1832; in 1834 only 23 tons were so shipped. In 1843, ^ 
year after the railroad had been completed to Cumberland, 
1,219 tons of live-stock were transported to the east, and in 
1849 ^^^ maximum of 18,991 tons was reached. 

After the railroad reached Cumberland lard and butter 
acquired some prominence as articles of eastern shipment, 
amounting in some years to nearly 1,800 tons. 

Whiskey was an important article of shipment, the 
amount shipped east increasing from 66 tons in 1832 to 
1,1 1 1 tons in 1848. Bark for tanning purposes, leather and 
firewood were other commodities which were given a new 
value in the places of their production through the facility 
and cheapness of transportation afforded by the railroad. 
General farm products, such as potatoes, cabbage, vege- 
tables, fruits, etc., also found a wider and better market with 
the operation of the railroad. After the railroad reached 
Cumberland the shipments of these products increased from 
hundreds to thousands of tons. 



76 The Economic History of the [350 

Growth of Towns. 

The opening of the road marked the beginning of a new 
era in the history of Cumberland. The city was made the 
point of exchange for passengers and merchandise between 
East and West. Hotels and warehouses were erected. The 
facilities afforded for rapid transportation over the mountains 
greatly increased the travel between Cumberland and the 
West. This is evidenced by the larger use of the National 
Road after the completion of the railroad to Cumberland. 
From March i to March 20, 1849, ^^ l^ss than 2,586 pas- 
sengers were carried over the National Road. In 1830 the 
population of Cumberland was 1,162, in 1840 it was 2,384, 
and in 1850 in was 6,105. When the Baltimore and Ohio 
was completed to Wheeling in 1853 the effect was soon felt 
in Cumberland. Most of the stage lines were taken off and 
the business of transferring merchandise was greatly dimin- 
ished. But Cumberland continued to grow in wealth and 
population, and in this growth the railroad played an im- 
portant part."^ 

The effect of the extension of the railroad upon the devel- 
opment of other Maryland towns was almost immediately 
beneficial, although not always capable of accurate measure- 
ment. When Frederick was connected with Baltimore in 
December, 1831, a ready market for the products of the 
surrounding region was established and land values were 
enhanced. The effect upon reaching Point of Rocks has 
been described.* The completion to Harper's Ferry secured 
connection with the Potomac and Winchester Railroad, 
penetrating the most fertile parts of Virginia. Harper's 
Ferry marking both a physical and commercial break in 
transportation, grew in population, wealth and importance 
after this time. 

Before the railroad reached Cumberland, Frostburg was 
but a straggling village of a few hundred souls.^ After the 

^ Cf. W. H. Lowdermilk, " History of Cumberland," pp. 349-376. 
^See above, pp. 26-27. 
J. T. Scharf, " History of Western Maryland," Vol. II. 



351] Baltimore and Ohio Railroad, 1827-1853. 77 

opening of the mines, due to the railroad, a number of min- 
ing companies set actively to work, employing hundreds 
of men and establishing the nucleus of a flourishing and 
prosperous town. 

The railroad was a great stimulus to the growth of the 
population, trade, manufactures and wealth of the city of 
Baltimore during the period from 1827 to 1853. Nearly 
2,000,000 tons of commodities, including flour, tobacco, 
grain, live-stock, coal, iron, wood, leather and building stone, 
were shipped into Baltimore from the West alone via this 
railroad during this period, and either distributed by Balti- 
more shipping or utilized in new local manufactures. By 
the time the railroad was completed to Wheeling the indus- 
tries of Baltimore included iron and copper works, woolen 
and cotton manufactures, flouring mills, manufacturers of 
white-lead, glass, shot, printer's ink, types, pottery, agricul- 
tural implements, powder, carpetings, house furniture, hats, 
cloth, etc., as well as distilleries and sugar refineries.^ Not 
only had the railroad encouraged the establishment of these 
industries by transporting to Baltimore at low cost the raw 
materials required, but it also distributed in part the manu- 
factured products throughout Maryland. Thousands of tons 
of these commodities were transported westward by the 
railroad evers^ year, as well as large quantities of fish and 
oysters from the Chesapeake Bay, which were unloaded at 
the Baltimore wharves. During 1852 over 75,000 tons of 
merchandise were transported westwardly. The commodi- 
ties shipped included salt, cofifee, sugar, molasses, fish, 
oysters, lumber, plaster, dry-goods, manufactured iron, fur- 
niture, vehicles and machinery, drugs and paints, oils, 
groceries, guano and manures, bricks, etc. About 8,500 
tons went to Frederick, 3,350 tons to Harper's Ferry, 9,500 
to Winchester, 1,350 to Martinsburg, 24,500 to Cumberland, 
and nearly 30,000 tons to other points along the road."* 

^ De Bow, " Industrial Resources of the South and West," Vol. I, 
p. 103. 

^ Apropos of the dependence of Baltimore upon the West, J. H. 
B. Latrobe remarked at a banquet given in honor of the opening 



78 The Economic History of the [352 

Finances of the Railroad. 

During the period from 1827 to 1853 the finances of the 
Baltimore and Ohio present none of those complexities 
which appeared in the later history of the railroad. The 
organization of the company and the management of its 
business were directed to the single object of making the 
road an efficient channel of communication between the 
East and the West. The company had no speculative pur- 
poses in view, but simply attempted to make the railroad a 
paying investment to the bona tide stockholders. This 
policy was consistently carried out. The company's stocks 
represented actual money paid in for the purpose of con- 
structing and equipping the railroad. They were not watered 
for the profit of the originators of the road. Even when 
" scrip " was issued, from 1848 to 1853, it represented net 
earnings applied to construction and repairs, and was not 
issued simply to reduce nominal dividends. 

The bonds issued by the railroad company during this 
period were for money urgently needed. Although some of 
these bonds were sold as low as 80 with par at 100, yet the 
sales seem to have been justified by the necessity of finish- 
ing the road. This alone could make the railroad pay any 
returns, or indeed prevent the practical loss of a large part 
of the sums already expended. 

The dividends during the period 1827-1853 were as 
follows : 

January, 1831 $o.37>^ 

January, 1832 60 

July, 1832 .75 

February, 1833 75 

October, 1835 i.i2j^ 

of the railroad to Wheeling in January, 1853, "The West built up 
Baltimore — first with the pack-saddle, then with the country road, 
then with the turnpike, and is now about to employ the greatest 
agent of modern times to realize the destiny appointed by Provi- 
dence." 



353] Baltimore and Ohio Railroad, 1827-1853. 79 

October, 1840 $2.00 

October, 1841 2.00 

October, 1843 200 

October, 1844 2.50 

October, 1846 ($1 cash, $2 bonds) 3.00 

November, 1847 ($3 in bonds at 6^) 3.00 

November, 1848 (stock) 3.50 

November, 1849 (stock) 5.00 

November, 1850 (stock) 7.00 

November, 1851 (stock) 7.00 

November, 1852 (stock) 7.00 

May, 1853 (stock) 3.00 

From the above enumeration it will be seen that the rail- 
road at no time during this period was really a paying in- 
vestment to the stockholders. The railroad paid only in 
the sense that it preserved and increased the trade of Balti- 
more with the West. The road was practically built three 
times east of Harper's Ferry during this period, and the 
great cost of construction, equipment and repairs prevented 
any large net earnings. 

The issue of stock-orders by the company in 1839 and 
1840, as detailed above,^ was a financial measure which 
served the railroad well by enabling it to make use of 
Baltimore's subscription at a time when funds were needed 
and the possibility of floating the city stock doubtful. That 
the stock-orders circulated for a time at par and as currency, 
however, does not prove at all that such a form of money 
was desirable. The eventual depreciation of the certificates 
worked much hardship to laborers obliged to receive them 
in payment for work. Public opinion was roused to such 
an extent that in March, 1846, the legislature of Maryland 
prohibited the railroad company from issuing " anything in 
the nature of a bank note or other paper to be used for 
circulation as a currency." ^ 

^ See pages 47-48. ^ Acts of Maryland Assembly, 1845, ch. 313. 



80 The Economic History of the [354 

While the general financial policy of the company was 
to complete the road as originally projected as soon as 
possible, in order to secure for the stockholders adequate 
returns on their investments, yet the particular manner in 
which the policy was carried out differed somewhat under 
the three presidents of the railroad who guided its affairs 
during this period. 

Under President Philip E. Thomas (1827- 1836) the mag- 
nitude of the undertaking was not clearly seen, and conse- 
quently adequate provisions were not made for securing 
the capital necessary to carry the work to completion. A 
policy, perhaps too cautious, was pursued with regard to 
expenditures, and profits were divided which were too small 
to be advantageously distributed and which would have been 
more effective if used in the improvement and extension of 
the road. 

During the administration of President Louis McLane 
(1836-1848) the results of this policy became evident. A 
cheaply constructed and imperfectly planned railroad proved 
not only entirely inadequate for the purposes for which it 
was needed, but its defects were the cause of the expenditure 
of large sums of money for repairs and reconstruction, which 
ought to have been available for the extension of the road to 
Cumberland. To add to the difficulties of the company 
came the panic of 1837. The years 1838 and 1839 were the 
darkest in the history of the Baltimore and Ohio during 
the whole period before 1853, ^^^ work had to be suspended. 
With the help of city and state loans the company resumed 
construction and net receipts began to increase. From 
1836 to 1840 the company used its earnings for new con- 
struction, and borrowed only where absolutely necessary to 
keep the road in running order. The device of paying some 
dividend in order to raise the credit of the company was 
employed from 1840 to 1847. 

The policy of President Thomas Swann (1848-1853) was 
the completion of the road to the Ohio at any cost as a con- 
dition precedent to its successful operation. Earnings were 



355] Baltimore mid Ohio Railroad, 1827-1853. 81 

used as capital and dividends declared in stock; bonds were 
issued to be sold at a high price if possible; but, in any 
event, to be sold. Everything that would perfect the road 
with regard to the route and to equipment was tried. 
To obtain the carrying trade of Virginia, the Winchester and 
Potomac Railroad was bought. Acts of the Virginia legis- 
lature were accepted not altogether to the liking of the com- 
pany in order to complete the railroad to Wheeling. It 
was confidently expected that adequate returns on capital 
would be secured after that point had been reached. The 
financial policy of President Swann may be summed up in 
the phrase, " Finish the railroad as rapidly and as thor- 
oughly as possible; it will pay, no matter what it may seem 
to cost." 

The Maryland legislature acted as a real arbitrator be- 
tween the Baltimore and Ohio Railroad and the Chesapeake 
and Ohio Canal, not only in regard to right of way, but also 
in the attempt to arrange for a division of trafidc on the two 
lines of transportation. An attempt of the Maryland legis- 
lature to secure the co-operation of the two companies in 
the transportation of coal from Cumberland is an instance 
in point. 

The fixing of rates by Maryland and Virginia in the char- 
ters and in subsequent legislation has been previously noted. 
The railroad was regarded during the earlier part of this 
period as essentially a special kind of highway or toll road. 
The rates were generally fixed as maximum rates, and at 
first were based entirely on weight.^ 

The state of Maryland and the city of Baltimore occupied 
a unique position during most of this period by the exercise 
of direct control over the affairs of the railroad company. 
As stockholders they were entitled to have directors to 
represent their interests ; but these directors were not elected 

^ Some of the laws fixing rates are: Maryland Acts, 1826, ch. 123, 
sec. 18; 1830, ch. 117; 1835, ch. 395, sec. 9; 1836, ch. 261; 1840, ch. 86; 
1840, ch. 370. Virginia Acts: Charter, 1827; 1837, ch. 118, sec. 24; 
1839, ch. 98, sec. 4, etc. 



82 The Economic History of the [356 

by the general body of stockholders, but were appointed 
by the governor in the case of the state, and by the joint 
ballot of both branches of the City Council in the case of the 
city. Baltimore was given two directors in the company for 
its first subscription of 5,000 shares in 1827, and one director 
for each 5,000 shares of its subsequent subscription of 
$3,000,000 in 1836. The city was to have in no case more 
than twelve directors in all. Maryland had two directors 
for the subscription of 5,000 shares in 1827 and was author- 
ized to appoint one additional director for each 5,000 shares 
subscribed in 1835, on account of the $3,000,000 subscrip- 
tion. When the state sold its interest in the Baltimore and 
Ohio (authorized by act of Assembly of 1842, ch. 301, passed 
March 10, 1843) the right of appointing directorships of 
course stopped. 

The beginnings of discrimination in rates between com- 
petitive and non-competitive points are to be noted in the 
early years of the company. Petitions were received from 
time to time after 1840 from merchants engaged in the flour 
trade in Baltimore, stating that in consequence of the low 
rates charged on the Chesapeake and Ohio Canal the ship- 
ments of flour were being rapidly diverted from the Balti- 
more market to the District of Columbia. The flour trade 
had always been considered of great importance to the 
prosperity of Baltimore, and as long as communication with 
the interior had been kept up by turnpikes almost the entire 
product of Maryland and of a considerable portion of Penn- 
sylvania and Virginia had been brought to the Baltimore 
market and had constituted a most important element in the 
growth and prosperity of that city. But owing to the com- 
petition in transportation due to the above-mentioned canal 
and the Cumberland Valley Railroad — extending from 
Chambersburg to Philadelphia — the flour inspections at Bal- 
timore for several years past, instead of having increased 
with the growth and settlement of the country, had scarcely 
equaled those of an earlier period. Reduction in rates of 
transportation was therefore asked for. 



357] Baltimore and Ohio Railroad, 1827-1853. 83 

The board of directors of the railroad recognizing that 
not only the trade in flour would be further diverted from 
the Baltimore market, but also a considerable portion of 
business more or less inseparably connected with the flour 
trade, entailing not only a serious loss to the city, but also 
a definite and absolute loss of traffic to the railroad, resolved 
in 1845 to reduce charges only along that portion of the road 
which was adjacent to the Chesapeake and Ohio Canal to a 
minimum which would at least pay the expenses of trans- 
portation. This is perhaps one of the very earliest instances 
on record of discriminations in rates due to the rivalry of 
competitive points. Nothing was done to prohibit this at 
the time/ 

Improvements in Technique. 

The Baltimore and Ohio Railroad, as one of the pioneer 
roads in America, encountered and solved many difficult 
problems in the mechanics of railroading. Car wheels, for 
example, were first constructed with the flange on the inside 
edge. This caused many a derailment and many a broken 
wheel, and led to the invention of the outside flange car 
wheel. Still the wheel was unsatisfactory, especially in turn- 
ing curves, and the invention of the conical flange was the 
result. ' Car wheels at this time were constructed of cast 
iron. To the Baltimore and Ohio must also be attributed 
the anti-friction box on the axles of the car wheels, and the 
use of the eight-wheeled car, both inventions of Ross 
Winans. During the period 1830 to 1853 radical and im- 

^ Virginia passed a law, March 6, 1847 (Acts of Virginia, 1846, ch. 
99) against discrimination in rates on the Baltimore and Ohio Rail- 
road with regard to long and short hauls, forbidding the company 
to " charge for transportation or travel to or from Baltimore from 
or to any point distant more than five miles in a direct line from 
the Ohio river more in the aggregate than for transportation or 
travel from Wheeling to Baltimore, or from Baltimore to Wheeling 
respectively, nor more in the aggregate from any depot west of 
Harper's Ferry to Baltimore, or from Baltimore to such depot, than 
from any oth-er depot more distant from Baltimore to Baltimore, or 
from Baltimore to such last-mentioned depot." 



84 The Economic History of the [358 

portant changes were made in the construction of steam 
locomotives, and the introduction of the " Grasshopper " and 
" Camel " types are due to the Baltimore and Ohio and its 
engineers. When completed to Wheeling the road-bed em- 
bodied the results of the highest engineering skill in con- 
struction over the Alleghany mountains, and included the 
longest railroad bridges and trestles and the longest tunnels 
of any railroad in America. Many valuable improvements 
in track-construction, road-bed, stringers, ballast, switches, 
turn-outs, and especially in the method of laying of rails for 
turning sharp curves, are attributable to the Baltimore and 
Ohio Railroad. 



^ See " Address " by President Mendes Cohen, delivered before 
the American Society of Civil Engineers, June, 1892, " Proceed- 
ings," pp. 535-558. 



359] Baltimore and Ohio Railroad, 1827-1853. 85 



VIL— APPENDIX 

I. — Chronology of the Baltimore and Ohio 
Railroad. 

First general meeting of citizens contemplating a railroad, 

February 12, 1827. 
J^ct of incorporation granted by Maryland, February 28, 1827. 
,Act of incorporation confirmed by Virginia, March 8, 1827, 
Requisite amount of stock for organization subscribed by April i, 

1827. 
Company organized; directors elected, April 23, 1827. 
Preliminary surveys begun, July 2, 1827. 
Actual surveys begun, November 20, 1827. 

Charter confirmed by the state of Pennsylvania, February 22, 1828. 
Maryland became a stockholder, March 6, 1828. 
Corner-stone laid, July 4, 1828. 
Railroad opened to Ellicott's Mills, 14 miles (horse-power), May 

22, 1830. 
Trial of the first steam locomotive on the Baltimore and Ohio 

Railroad, August 25, 1830. 
Railroad opened to — 

Ellicott's Mills, 14 miles (steam-power), August 30, 1830. 

Frederick, 61 miles, December i, 1831, 

Point of Rocks, 69 miles, April i, 1832. 

Harper's Ferry, 81 miles, December i, 1834. 

Hancock, 123 miles, June i, 1842. 

Cumberland, 178 miles, November 5, 1842. 

Piedmont, 206 miles, July 21, 1851. 

Fairmont, 302 miles, June 22, 1852. 
Last spike driven; finished, Baltimore to Wheeling, 379 miles, 

December 24, 1852. 
First train reached Wheeling from Baltimore, January i, 1853. 
Railroad opened, Baltimore to Wheeling, 379 miles, January 10, 

1853. 



86 The Economic History of the [360 

2. — Cost of Construction. 

Baltimore to Harper's Ferry $ 4,000,000.00 

Harper's Ferry to Cumberland 3,623,606.28 

Cumberland to Wheeling 6,631,721.00 

First cost of 379 miles of railroad $14,255,327.28 

Cost of reconstruction, etc., east of Cumberland 962,589.02 

Extension to Locust Point 180,205.63 

Camden Street Station (ground) 230,841.31 



Grand total $15,628,963.24 

Estimated cost of construction (Feb., 1827), $5,000,000. 

Real cost of construction (Jan., 1853), $15,628,963.24. 

Estimated length of road (Balto. to the Ohio river) (Feb., 1827), 

290 miles. 
Real length of road (Balto. to the Ohio river) (Jan., 1853), 

379 miles. 
Estimated revenues per annum (Feb., 1827), $750,000.00. 
Real revenues per annum (Oct. i, 1853), $2,033,419.80. 



361] Baltimore and Ohio Railroad, 1827-1853. 87 






Years ending Octo- 
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5 . — Bibliography. 

1. Annual Reports of the President of the Baltimore and 
Ohio Railroad Company (1827-1853). 

2. Reports of the Treasurer, the Engineers, the Masters 
of the Road, of Machinery and of Transportation respec- 
tively, of the Baltimore and Ohio Railroad Company (1827- 

1853)- 

3. Various reports, pamphlets, broadsides, etc., etc., to 
be found in the library of the Maryland Historical Society 
of Baltimore, covering the period 1827-53. 

4. Contemporary files of the Baltimore American and 
Daily Commercial Advertiser (1827-1853). 

5. Scharf's History of Maryland. 3 vols. Baltimore, 

1879. 

6. Niles' Weekly Register (1826-1836). 

7. " The Book of the Great Railway Celebrations of 1857." 
W. P. Smith. New York, 1858. 

8. "Railroads: their Origin and Problems." Charles 
Francis Adams, Jr. New York, 1878. 

9. " Bibliography of the Baltimore and Ohio Railroad 
Company, 1827- 1879." John W. M. Lee. Baltimore, 1879. 

10. " A History and Description of the Baltimore and 
Ohio Railroad," etc. [W. P. Smith.] Baltimore, 1853. 

11. " The History of the First Locomotives in America.'' 
WilHam H. Brown. New York, 1871. 

12. " Laws and Ordinances relating to the Baltimore and 
Ohio Railroad Company." J. Murphy & Co., PubHshers, 
Baltimore, 1850. 

13. "History of Cumberland." W. H. Lowdermilk. 
Washington, 1878. 

14. " The History of Western Maryland." J. T. Scharf. 
2 vols. 

15. " Industrial Resources of the South and West." J. B. 
De Bow. 3 vols. New Orleans, 1852-53. 



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VII-VIII 

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